Faster Check Processing Will Impact Many Consumers

SALISBURY, MD – Almost one-quarter (23%) of consumers write checks to pay bills before sufficient funds are deposited in their accounts, according to consumer research recently completed by ESP Consulting, a division of Phoenix Marketing International. Aware that there is typically a delay of several days due to mail and processing delays between the time the check is written and the time the transaction will be posted to their account, these consumers take advantage of this float, depositing funds in time to keep from bouncing checks.

Contrary to popular assumptions, “check floaters” are not only found among young and low-income customers. In fact, some of the best banking customers use the practice, at least from time to time. According to Leon Majors, President of ESP Consulting, however, “As many big billers rapidly adopt ARC to process check payments, and with the changes that will result from Check21, consumers will see float time dramatically reduced and will have to change their check writing habits.”

ESP Consulting, a premier financial services research firm, just completed its fourth annual survey of consumer usage of, and attitudes and preferences for payment related products and services. The survey of more than 2000 consumers nationwide confirms the extent to which many consumers rely on a few days of float when writing checks, and reveals how their purchasing and bill payment behavior will be altered by faster check processing.

Results from ESP Consulting’s consumer payments study, in conjunction with results from its soon-to-be-completed bank Check Processing survey, reveal how both consumers and banks will respond to check processing changes, including to the loss of float.

“Many consumers tell us that if they lose check float time they will use credit cards instead of checks for some in-store purchases and delay mailing bill payments until they actually have the money in the account to cover the check. Such actions will have major consequences for banks, billers and check processors,” says said Ken Kerr, VP for Retail Payment Strategies. “Banks are likely to be confronted, at least in the transition between check processing methods, by a sharp increase in the volume of NSF transactions. This will be a sensitive consumer issue and banks will have to decide how they are going to handle this situation and inform their customers accordingly,” adds Kerr.

“In addition to NSF issues,” Majors points out “billers face the prospect of an increase in their average DSO and the check processing industry as a whole should be preparing for radical shifts in check processing volumes.”

ESP Consulting’s annual Consumer Payment Preferences Study measures consumers’ current bill payment and point-of-sale purchasing behavior in great detail, and assesses consumer attitudes on current and future payment options, payment security and fraud issues, and on ATM, check and payment card usage. The bank Check Processing study, also conducted by ESP Consulting on an annual basis, tracks check processing volumes and methods, as well as check processing systems, equipment and budgets.