Jordan Meadows, Staff Writer
In a rapidly digitizing financial world, the United States is witnessing a significant decline in the usage of cash and checks, according to a recent report from the Federal Reserve Bank of Atlanta (FRBA). The report, which compares payment methods across 20 countries, highlights a remarkable shift in consumer behavior towards digital payment alternatives.
The data from the FRBA reveals that the proportion of checks used in cashless transactions in the U.S. plummeted from 17.4% in 2012 to a mere 5.1% in 2021. Despite this decline, the U.S. still maintained its lead over other nations in check usage, albeit by a smaller margin.
In terms of the total value of checks used as a percentage of overall cashless payments in 2021, the U.S. ranked third, trailing behind Canada and Singapore. The report noted a decline in the U.S. share from 35.1% in 2012 to 19.6% in 2021.
Moreover, while the use of checks has diminished, so has cash usage. A Gallup Poll indicates that only 13% of survey respondents predominantly use cash for purchases, marking a sharp decline from 28% just five years before the poll.
The COVID-19 pandemic played a pivotal role in reshaping consumer payment habits: concerns about virus transmission prompted a reluctance to handle physical currency, and with everyone huddled up inside of their homes for months at a time, it further accelerated the adoption of digital payment methods.
One of the most notable trends is the ascendancy of credit cards, which have become the preferred mode of payment for nearly a third of all transactions in the U.S. The surge in digital payment apps such as Venmo, PayPal, and Zelle has also contributed to the decline of cash and checks. These platforms offer enhanced security features and convenience, resulting in a rapid increase in usage post-pandemic.
Paper checks are now a rarity, accounting for just 4 percent of all transactions. The majority of Americans have abstained from writing a check in the past month, and even among those who do, the practice is infrequent. Checks are most commonly employed in high-value transactions exceeding $500, but even in such cases, they are utilized only 14 percent of the time.
Despite the declining trend, checks remain prevalent among retirement-age Americans, with three-quarters of this demographic still relying on them, in stark contrast to their college-age counterparts, of whom fewer than a tenth use checks. Moreover, check usage is more prevalent among individuals with higher education and income levels, irrespective of age.
Geographically, check usage appears to be most pronounced in the Pacific Coast and Midwest regions, while it remains lowest in the East and South. However, checks still hold sway in specific scenarios such as dealings with contractors, charities, taxes, and landlords. Nevertheless, attempting to pay for groceries or fast food with a check is likely to elicit puzzled expressions, as data indicates that checks are virtually obsolete in such everyday transactions.
Additionally, disparities in payment methods persist among different racial groups. White Americans are more likely to write checks compared to their Black, Hispanic, and Asian counterparts. Factors such as access to banking services contribute to these differences.
The transition towards digital payments offers numerous advantages, including speed, convenience, and enhanced security. Electronic transactions eliminate the need for physical infrastructure like check-processing centers, reducing operational costs and mitigating the risk of fraud.
Digital payments offer convenience and security, surpassing traditional methods like checks. Online payments are faster and cheaper, and banks prefer electronic checking for its lower fraud risk. Digital methods are also beneficial for those living paycheck to paycheck due to their enhanced speed and efficiency.
Fed check-processing centers have decreased by almost three-fourths since 1990, marking the decline of paper checks as a 20th-century icon, akin to the landline phone and floppy disk.
As technology continues to evolve and consumer preferences evolve with it, the era of cash and checks as primary payment methods appears to be waning, making way for a more streamlined and secure digital financial ecosystem.
