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This is Bob Saunders, vice president of sales for Wise. Have you noticed that, even as payments continue their march toward fully digital transactions, paper checks are stubbornly hanging around? In fact, according to the 2024 Federal Research Payments Study, 21 billion checks were processed through banking systems in 2021, the most recent year for which data is available. So . . . who’s using all of these checks?
Typically, our customers are selling paper checks to end users like small and local businesses, government agencies, and businesses in markets where large sums of money are processed at various stages of payment. Examples include construction and trade services, healthcare, and education. Other users of paper checks include low-margin businesses and organizations like nonprofits where transaction fees can have an out-sized impact on their bottom lines. Let’s take a closer look at some of the reasons end users—both businesses and individuals—are still purchasing paper checks.
- Reduce processing fees. Credit card processors typically charge a percentage of the transaction amount plus a fixed fee per transaction. As a result, electronic payments can be expensive. With processing fees generally ranging from 1.5% to 3.5%, a small business bringing in $1 million in sales would spend $15,000–$35,000 in fees alone, not including the per-transaction fee.
For businesses and organizations with razor thin margins, or that process high numbers of individual transactions, paper checks keep that money in their pockets.
- Greater sense of financial security. The physical nature of checks allows many businesses to feel that there is greater financial security and that they have more control over their payment processes. Online hackers can’t get into your paper checkbook.
- Record-keeping. Checks generate a paper trail that many people prefer. This is especially true for those writing checks for larger amounts and for businesses that operate in heavily regulated industries like financial services. Physical checks are often preferred by those needing to maintain detailed financial records.
- Familiarity. Many individuals and businesses are simply more comfortable with paper checks. Physical checks are familiar, especially for the older generations who grew up with them. According to a survey by the Atlanta Federal Reserve Bank, more than half of people aged 45 to 64 write checks regularly.
- Legacy processes. Change can be painful. Many businesses figure, once you have a system set up, why fix what isn’t broken?
- Cash flow management. Checks allow businesses to manage cash flow strategically. By delaying cashing a check, for example, businesses can maintain liquidity for a longer period of time, giving them greater control over their finances.
While digital payments have undoubtedly become the norm, paper checks still hold significant value for many individuals and businesses.From small local companies to government agencies, businesses and organizations have plenty of reasons to still use paper checks, and they do! Wise distributors order millions of paper checks every year.
Not yet a reseller of paper checks? Contact your Wise RSM to find out how to get started. Thanks for listening, and have a great day!