Paper checks forever?
ONCE A MONTH, Kevin Barner sits at a desk in his Mansfield home, turns on his computer, and tends to what he calls “Kevin, Inc.” A click here, a click there, and he’s paid all of his household bills.
“For years, I wrote checks,” he says. “Now, I say to myself, ‘how did I ever write checks?’ It just took so long.”
But Kevin, Inc. isn’t his only gig. Barner is also the chief financial officer for Roche Bros., a supermarket chain with 19 stores in eastern Massachusetts and $575 million in annual revenue. And while his office makes some electronic payments, it still cuts plenty of physical checks. Hundreds of them per week, in fact. Checks for part-time workers. Checks for electricians. Checks for meat suppliers and egg suppliers and produce suppliers.
Barner knows how it looks; all this check-writing would never fly at Kevin, Inc. But Roche Bros. writes so many. Unwinding the system would be such a hassle and well, “it just works,” Barner says.
It just works.
The check has to be one of the strangest objects of the digital age — utterly obsolete, but somehow totally essential; cast aside and yet still right here; a little slip of paper propping up a bits-and-bots economy.
That it’s past its prime is beyond dispute. Peak Check came a couple of decades ago, in 1995, when Americans filled out 49.5 billion. By 2015, the figure was down to 17.9 billion. And in the coming years, mobile payment services like Apple Pay and Zelle are sure to cut into the total even further.
Checks, meanwhile, are a bit player in the rest of the world. Most of Europe never took to them in the first place, the British being a notable exception. And the developing world is skipping right to mobile payments.
But here in the United States, they just won’t go away. More than half of business-to-business payments are still made by check, according to a 2016 survey by the Association for Financial Professionals — making companies like Roche Bros. more the rule than the exception.
The check has even muscled its way onto the Internet. It’s common, now, to take a photograph of a paper check and deposit it in the bank via a mobile app. And the Wall Street Journal recently reported that Amazon, of all companies, is weighing the launch of a checking-account-like product.
It’s hard to say why, exactly, the check has survived. But the answer lies, at least in part, in what economists call “path dependence” — a series of past events locking us into a certain kind of present, no matter how inefficient.
The theory explains the persistence of some of our culture’s oddest relics — from our patched-together, half-public/half-private health care system to that oddly-configured QWERTY keyboard you tap on every day.
Financial historians say it applies to the check, as well, its path deepened by accidents of history — including a Civil War-era economic disruption that helped kill off a rival financial instrument — and all manner of clever innovations, among them a mid-20th century check-processing breakthrough in a Stanford laboratory.
And when a particular technology burrows itself into the culture, something curious can happen. We can grow attached to it. We can imbue it with an emotional resonance that makes it even harder to abandon.
The check might seem like an unlikely candidate for this kind of nostalgia —
too cold, too transactional. But it shows up in some of the most meaningful moments in our lives: handed across a table when we close on our first home, or slipped into a niece’s birthday card.
We want the important stuff to be tactile, it seems. We want to hold it in our hands. Sometimes, “I wired you $25” just won’t do.
Indeed, the persistence of the check may be less about our allegiance to the slip of paper than our uneasiness about what would replace it. The digital age can seem too ephemeral. Perhaps the check — like the book, the diary, and the sketchpad — is a sort of rebellion against impermanence.
ABOUT A THOUSAND years ago, a Persian traveler named Nasir-i Khosrau turned up in Aydab, a medieval port on the Red Sea, with a letter from an associate in Egypt.
“Give Nasir all that he may demand,” it read, “obtain a receipt from him and debit the sum to me.”
It is among the first documented checks in human history. Billions and billions more would follow.
The case for the check, or something like it, was just too strong. Global trade was growing, and it was becoming increasingly impractical to haul around big sacks of coins — and more than a little dangerous.
The check offered portability, safety, and a bit of magic to boot. Put ink to paper and you could conjure up your own currency, in any denomination you like.
The instrument had its failings, no doubt — relying on the word of the check-writer meant inviting a certain amount of fraud and abuse. In 1526, Venice banned the check outright, and Barcelona imposed restrictions of its own a year later. But the check endured anyhow, too useful to be stamped out by a bunch of persnickety bureaucrats.
Still, if there was a certain genius to the check, says William Roberds, a research economist and senior adviser for the Federal Reserve Bank of Atlanta, luck played a significant role in its endurance.
In the end, he says, the check “kind of happened by mistake.”
After the French routed the British in a series of 17th century naval confrontations, culminating in the Battle of Beachy Head, King William III chartered the Bank of England in 1694 to finance the reconstruction of the British navy.
Parliament followed with a series of laws concentrating power in the bank, and one provision barred large competitors from printing paper money. The effect was to suppress an important rival of the check — the banknote — and guarantee its role in the economy for decades to come.
In the United States, the Civil War brought similar restrictions on banknotes and disrupted the market for another financial instrument known as the “bill of exchange,” which had facilitated antebellum exchanges between, say, New Orleans cotton merchants in the South and New York wholesalers in the North.
The real checking boom came a century later, though, after World War II, when a suddenly flush middle class fueled a surge in demand for payment services. The number of checking accounts in the United States nearly doubled between 1939 and 1952.
The surge led to a sort of check processing crisis in the banking industry. Clearing was done by hand, and clerks were required to tally them on adding machines at least a half-dozen times before they could be deposited.
Bank of America executives went to the Stanford Research Institute for help in 1950. And five years later, they introduced the Electronic Recording Machine, Accounting system, or ERMA, which included those odd-looking, blocky numbers that appear on the bottom of your checks. The font, known as E13B, is a magnetic ink character-recognition code, or MICR, that can be scanned by computer.
As processing times shrunk, checks became more and more ubiquitous in American life. Families used them to pay their electricity bills and purchase groceries, to buy used cars and school supplies and sports equipment.
But however integral checks became, mom and dad could set them aside rather easily when the credit and debit card came along. All they had to do, after all, was drop the checkbook in a drawer.
It wasn’t so easy for business, which had invested in all sorts of check printing and sorting equipment and developed sprawling webs of business-to-business relationships connected by long chains of paper.
Roche Bros., the grocery chain, has untangled some of that web. It’s been making electronic payments to a handful of its largest vendors for some time now. But Barner, the chief financial officer, says the company’s smaller vendors still do business by check, and it’s just easy to stick with a system that works.
Sticking with that kind of system comes at a cost — steeper, even, than Roche Bros. and other companies may realize. Bank of America estimates that a typical business check costs $4 to $20, when you include the price of the check itself, shipping, and the employee time devoted to printing and reconciling.
But reaching out to all of Roche Bros.’s small vendors and converting to an entirely electronic system would come at a significant cost, too, and “it just hasn’t been a priority,” says Barner. The company’s central office — a modest, three-story brick building just off Route 9 in Wellesley — is focused on testing out new crackers and sauces, supporting its 19 existing stores, and planning for expansion.
And after all these years of paying by check, American business has latched onto some pretty useful features. The check, for instance, bears all sorts of useful information on who is sending the money for what — making it easy to match payments with invoices. Many wire transfers and automated clearing house payments don’t come with that sort of detail.
Moreover, the natural delay built into mailing and processing a check comes with a financial advantage — giving the sender a few extra days of liquidity and a few extra days of interest. Indeed, businesses once contracted with far-flung check processors in Maine or Alaska with the express purpose of slowing down payments.
Still, Barner says companies are finding ways to build that couple days’ cushion into electronic payment arrangements — asking vendors to take payment, say, 16 days after delivering goods, rather than the typical 14.
The business case for checks, Barner says, is starting to crack. And if corporations back away from the check, and payment-by-app continues to grow, it’s bound to disappear.
“It’s definitely going to go away,” he says. “It has to.”
MARK KURLANSKY, THE author of “Paper: Paging Through History,” isn’t so sure.
“People keep expecting new technologies to shove out old technologies,” he says, “but what they do most of the time is create an alternative.”
The e-book, once seen as the death knell of the traditional book, is looking more like a complement to it, now — useful on business trips, but not entirely satisfying on a sunny Sunday morning, curled up on the couch.
Of course, a book appeals because of its intimacy. Turning those yellowed pages brings us a little closer to Huck Finn and Jim. Other paper products have a similar allure. The sketchpad records our dreams, the diary chronicles our heartbreak.
The check might seem impersonal, by contrast. But it can be a means of connection, too. “If I’m going to a Bar Mitzvah,” says Kurlansky, “I’m giving the kid a check. I’m not going to say, ‘look online for the deposit I made in your account.’ ”
Richard Harper, a computer science professor at Lancaster University and co-director of the school’s Institute for Social Futures, says at an event like a Bar Mitzvah, the “kid needs to be able to show the check, and needs to be able to give it to mum, and it needs to be trafficked around the table. It needs to be shareable. A gift is as much a showing of the gift as it is the thing itself.”
Without that kind of tangible exercise, a Bar Mitzvah is a simple counting exercise — it’s just reaching a certain age. It is “quite literally, immaterial,” says Harper. To imbue it with meaning, he says, we need to make it a physical event — with people and clothing, place settings and checks. We authenticate our lives with a fork clinking glass and a transfer of paper.
Paper can also help us with solemnizing our transactions — making them official. I pass you a check and you hand me a deed. I sign documents and you sign documents. Then, ownership has been transferred.
There’s something comforting about that chain of events. Something solid. And with so much of our lives floating in the cloud — something grounding.
We have a tendency to believe that any technological advance stamps out what comes before it. But a technology only triumphs, absolutely, if we let it. Human wants are, ultimately, determinative.
If people want books and deeds and diplomas and journals — if people want checks — then they will have them.