Payment Instruments: Checks

By Denise Bedell

Use of Checks by Non-Banks (number of transactions (millions, total for the year))

Use of Checks by Non-Banks (value of transactions(US$ billions, total for the year))

According to the Bank for International Settlements, a check (or cheque) is a written order from one party (the drawer) to another (the drawee, normally a bank) requiring the drawee to pay a specified sum on demand to the drawer or to a third party specified by the drawer. It is similar to a bill of exchange or a draft.

Check usage worldwide has been in a long, slow decline for many years, and continues to become a less-important payment mechanism as electronic forms of payment take greater hold of the non-bank payments environment.

However, while this holds true with most markets, checks continue to be central payment methods – both for companies and for consumer – in certain markets, such as the US, Singapore, and China. In 2009, checks accounted for 68.6% by total transaction volume of payment instruments in Singapore, 51.9% of US payment instruments, and 49.4% of Chinese payment transactions (see Payments Volumes Worldwide).

In 2009 the US saw total check volumes rise for the first time in years that the US has seen check volumes increase – going from 51.4% in 2008.

However, although total volumes rose, the total number of check transactions in the United States did decline – from 26.6 billion in 2008 to 25.3 billion in 2009 in the United States.

In the US, since the enactment of the Check 21 Act in 2004, electronic images of checks have been recognized as legal documents. Technology, such as remote deposit capture, enables electronification of a check at some point during its lifecycle. This has likely slowed the process of reducing check usage in the US market. However, that process continues, and other payment mechanisms are beginning to grow in importance.

According to BIS data, total check usage by number of transactions in Committee on Payments and Settlement Systems' (CPSS) member countries declined by almost 20% between 2005 and 2009 – going from 46 billion transactions in 2005 to 37 billion by 2009.

Data is from the Bank for International Settlements Committee on Payments and Settlement Systems (CPSS) Annual Payments Statistics, March 2011.

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Use of Checks by Non-Banks (number of transactions (millions, total for the year))

* Different methodology and data collection method since reporting year 2007.

Use of Checks by Non-Banks (value of transactions(US$ billions, total for the year))

* Different methodology and data collection method since reporting year 2007.

**Sum or average excluding those countries for which data are not available.