Even before the coronavirus outbreak, people were increasingly using cashless payments and digital checks (or e-checks) over cash, coins, and paper checks. What may have started out as a convenience, has—in the midst of a global health pandemic—also become the smarter and more hygienic way to pay. This is especially true as more people turn to e-commerce, digital payments, and digitized checks to transfer money (and pay bills) safely from the comfort of their home.
Money, of course, changes hands frequently multiple times every day. It is a very high-touch surface. However, since the COVID-19 outbreak, people and businesses have been avoiding cash for this very reason. To be clear, the World Health Organization did not confirm that banknotes transfer the virus. However, according to Bain & Co. partner, Thomas Olsen, there is a “psychological factor” for many people who believe it to be unclean and so choose to avoid it.
This way of thinking may not only accelerate the already growing use of cashless, contactless, and digitized checks now but also in the future. Many of the same hygiene practices that we have become used to during this time, may stick with us in the future. Cashless payments and digitized checks, which we’ll discuss in more detail, are among them.
Digital, digitized, or electronic (e-)checks performs the same function as a traditional paper check. However, digitized checks come with modern perks such as convenience, lower costs to issue, increased security features, and faster turnaround. Paper checks take days to process and are often fraudulent or bounce. Digitized checks can be delivered in real-time with the same day or overnight fulfillment.
This time savings alone—not to mention the cost and convenience factors—should be enough to finally say goodbye to paper checks. In the U.S., for example, check payments fell 7.2% per year from 2015 to 2018. But it’s still not entirely gone. In Canada, for example, financial institutions still process nearly a billion checks every year.
We wrote a post called Paper To Plastic To Digital Payments: Evolution Of Credit Cards And Checks if you’re interested in further reading.
Why are nearly a billion checks still changing hands in Canada when there’s a modern, convenient, faster, cheaper, and more secure alternative? “People default to what’s familiar, unless there’s something to jolt you out of it,” Jodie Kelley, CEO of the Electronic Transactions Association told CNBC recently. “Contactless payments have come up as a new option for consumers who are much more conscious of what they touch.” What if this same thinking applied not to just contactless payments, but to paper checks as well?
There are services, albeit VoPay included, that processes and verifies digitized checks—and digital payments, invoices, bulk e-payments, you name it—almost instantly. When it comes to digitizing checks, no physical material ever needs to be touched or changed hands. Personal financial information, such as our bank account details and bank branch numbers, ever need to be mailed or shared.
What if we took it one step further, moving beyond an electronic version of a paper check and tokenized the whole process? At VoPay, for example, the entire digital payments and digital checks system are tokenized. We wrote a post about tokenization and digital payment security, but essentially, it means that we’ve scrambled (algorithmically) the bank information and issued a secure token in its place.
During this time of health and safety uncertainty, many of us have turned to online shopping and delivery and digital banking to pay our bills or accept money transfers. People are steering away from handling cash back and forth. It’s a safer, more secure, and more convenient way forward. We believe that the same holds true of paper checks.