Check Conversion in the US

May 27, 2003



New York, NY, USA May 27, 2003

Celent predicts that 5.3bn checks will be converted to ACH by 2005, up from 0.5bn in 2002. Meanwhile, conversion will drive limited benefits to banks. By 2005, less than 5% of check conversion at the point of sale will be converted to card networks via Visa POS and SafeCheck.

In a new report, " " Celent analyzes the efforts by the payment industry to develop check conversion at the point of sale, at the lockbox, on the Internet and over the telephone. Having failed to make consumers stop writing checks, in the late 1990s the payment industry devised a mechanism to eradicate checks shortly after being written: check conversion. In this report, Celent reviews the state and prospect of the check conversion landscape, scrutinizes point-of-sale check conversion’s impact on the US$1.5bn check authorization market, and reviews banks’ efforts to leverage card networks to provide authorization and conversion services using Visa POS and SafeCheck.

"The payment industry has convinced itself that converting checks to electronic debits for processing would be easier and cheaper than massively converting consumers to electronic payment instruments"

comments Gwenn Bézard, Celent Senior Analyst and author of the report. "After a few years of efforts, this plan remains to be proven." At the point of sale, check conversion is developing only very slowly. At the lockbox, conversion is set to grow very rapidly, but at the cost of relatively significant efforts for banks, lockbox outsourcers and billers. Meanwhile, if conversion is developing rapidly over the telephone and the Internet, it is often to the detriment of cards, which generate hefty revenues and margins for banks.

The report predicts that conversion will bring limited benefits to banks. At the point of sale, check conversion over card networks is unlikely to drive significant interchange fees. "Check conversion will not save banks from stumbling again and again over the lack of cost-based pricing of consumer payment instruments," says Bézard. As banks market emerging electronic payment services such as online bill payment in a separate effort from conversion, they will find it difficult to convince consumers to pay higher fees for electronic payment instruments. The lack of cost-based pricing of payment instruments will delay banks’ ability to create or increase fees on direct debit, online bill payment, and cards.

The 38 page report contains 30 figures and 2 tables.

A is available online.



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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents


  New York, NY, USA May 27, 2003

Return to report Abstract


  The BIG Picture 5
  Volume Trends 7
  Overview 13
  Process 14
  Market Demand 15
  Impact on Market Players 20
  Banks Make Inroads Into the Authorization Market 25
  Visa POs 28
  SafeCheck 30
  Comparing Visa POs & SafeCheck 31
  Looking Forward 35

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