Are Checks Still Relevant?




Once upon a time, a transfer of money involved bags of heavy coins. Which proved unwieldy especially as commerce picked up. Here’s a brief history of how checks became the preferred method of exchange:

  • The first idea of a check shows up in ancient Rome in the 1st century BCE
  • In the 1200’s, bills of exchange began to be used for international commerce
  • In the early 1500’s in the Dutch Republic, ‘cashiers’ began to hold money for people for a fee and would cash notes written on that deposit
  • In the 1600’s, bills of exchange were introduced in England and by 1717 the Bank of England used a special form printed on “cheque paper” to prevent fraud
  • In 1770, clerks from all the banks in London would meet daily at a tavern to exchange checks and settle balances
  • In America, the Bank of New York, established by Alexander Hamilton in 1784, began issuing checks
  • In 1831, the Bank of Scotland was the first to personalize checks with customers’ names
  • In 1959, the standard for machine readable characters was established

Check volume increased steadily through the 1980’s and into the mid-1990’s when debit cards and other means of electronic transactions began.

But now there are people who believe we are seeing the end of the paper check and everything will be digital shortly…and others who say that is premature. Many countries in Europe no longer use checks, opting for a system called giro (wire transfers) or even doing transfers through an ATM. Finland stopped issuing checks in 1993! The nice thing about that system is the payer initiates the paying process rather than waiting for the payee to start the check cashing process.

The US is still dependent on checks with billions being written annually. New technologies are making it easier for small businesses to process credit cards, but there are still merchants who do not and most landlords require checks for rent payments.

Despite the statistics of one million forged checks per day, there is no evidence that digital is more secure than checks. Data breaches happen all the time and can affect tens of millions in one fell swoop. Because they are paper-based, checks are most costly to process and require more steps. Banks interested in lowering costs and increasing efficiency will continue to come up with alternate forms of payment and no doubt checks will one day be a thing of the past.

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