Are checks an endangered species?

A recent survey says yes. Nearly 30% of U.S. consumers no longer pay even one recurring bill each month with paper checks. Less than half of all bills are now paid by check. And, according to the American Bankers Association, a quarter of American consumers expect to use checks even less in the future than they do now. The use of paper checks has in fact been declining steadily since 1990, and most economists expect them to be phased out entirely in the near future.

And yet the American consumer still uses paper checks more than people in other countries do. 

This is surprising. Electronic payments are faster, more efficient, and require less effort on the part of the consumer -- they can even be set up automatically. They're also less risky. A single stolen check can give a thief access to your entire bank account, and check fraud is easier than electronic crimes. So why are we still writing checks?

One economist suggested that Americans, still coping with an economic downturn and financial insecurity, like the in-control feeling of actually writing numbers on a piece of paper. Electronic payments, in some people's minds, are strongly associated with credit cards, which may in turn be associated with freewheeling spending.

The Federal Reserve Bank of San Fransisco has another explanation: "Network externalities." That is, companies that don't allow electronic payments require the use of paper checks, so consumers can't give them up entirely. If you have to haul out the checkbook to pay some bills, then you might as well pay other bills that way.

If this is the explanation, then paper checks may well be doomed. Organizations from utilities to health care providers to churches are accepting electronic payments. Consumer studies have, since 2006, shown that people generally prefer electronic payments, and companies appreciate the lower costs and higher level of customer retention associated with offering EIPP.

Personal checks were on the recent list of "Things About to Become Extinct" from Schargel Consulting Group,  along with cameras that use film and phone books. They're probably right.