Law Further Propels Paperless Checking

A law that allows banks to exchange checks electronically took effect Oct. 28. Signed into law last year, the Check Clearing for the 21st Century Act, known simply as "Check 21," is expected to help checks clear faster, as the need to physically transport paper checks between banks is eliminated.

Ironically, this comes at a time when checks are being pushed aside by paperless forms of payment, such as credit cards, debit cards and online banking.

According to a study conducted by the American Bankers Association and Boston-based Dove Consulting, electronic payments have surpassed cash and checks as consumers' preferred payment method for in-store purchases.

The 2003/2004 Study of Consumer Payment Preferences found that cash and checks now account for 47% of consumers' in-store purchases, as compared to 57% in 1999 and 51% in 2001. This evolution in payment behavior is driven by the increasing popularity of debit cards, reports the association. The survey reports that four years ago, debit cards represented 21% of in-store transactions, while today nearly one in three (31%) consumers report in-store purchases are made with a debit card.