Recently, there was a comedy sketch on Saturday Night Live (SNL) that hit a little too close to home. The send-up showed a couple splitting a meal using Venmo. To contrast the efficiency, the scene then cut to a turn of the century piece detailing how “Cheques” still contain drama – “There is nothing like furiously scribbling on a small piece of paper, tearing out and then flicking your wrist [handing the check over].”
Our favorite part was when they walk through the “simple” process of filling a checkout and how you still need to put the date, the amount and then you get to use “your letters” to spell out the amount again.” The part closes by urging us not to forget the “squiggly line after the dollar amount because you never know how many zeros someone will add.”
Checks Are Drama
Checks are in fact, archaic and while they still contain drama, the reality is that the SNL piece could have gone farther. The fact that we still put the MICR-style font from 1950 of the account number at the bottom of the check is laughable considering no one sorts or scans checks anymore. Unless you have the signature of John Hancock, the signature line is worthless and gives everyone a false sense of security. Printing, the check numbering system, having a million individual scanners at teller windows and remote deposit scanners at businesses could all be turned into equally funny comedy routines.
For that matter, even our solutions that are five years old are painfully funny. Many banks still use P2P platforms that are dated. Thankfully, SNL doesn’t know about that. Having your mobile app tell you that the bank will turn an electronic payment into a paper check that will be sent three days from now is a comedy sketch in itself compared to applications like Venmo, Zelle, Square Pay, and others.
For that matter, the speed of payments, in general, is a whole other set of embarrassing jokes in itself. Consider that Amazon routinely sends physical goods faster, than it takes our banking system to move money – an intangible product.
Getting Rid of Checks and Other Anarchisms
There are much better ways to transfer money, and we need to do a better job of educating and enabling our customers to move into electronic payments. More and more payment applications are moving real-time further creating a distance between the turn of the century and modern times.
There is also the fact that an estimated 40% of the banks out there still send paper notices for electronic changes because they don’t have (or don’t use) the cell phone number of their customer. Think about that, a customer changes a material piece of information on their account, and we alert them of this important change via snail mail that takes at least three days to arrive? That’s embarrassing.
In our marketing materials, we discuss fax numbers, “destroying carbons” and we make customers print out forms and bring them into a branch. Checks, cashier’s checks, phone transfers, paper statements, deposited item reruns, overdrafts, and a couple of dozen other bank products are past their sell-by date.
The Rise of Real Time Payments
Ten years ago most of the world went to real-time payments. A Fed study, completed by the consulting firm McKinsey, showed that real-time payments would save customers and banks $10B per year between greater operating efficiency and fewer penalties/overdraft charges/fees for consumers.
Many banks continue to have both a business model and an operating model based on banking how it was in 1950. This model is not only out of step with technology trends, but it is inefficient, slower and leaves our industry open to fraud. The US lags in payment innovation and leads in payment fraud.
As P2P payment platforms become more common and then go real-time, banks that don’t adapt will be largely stuck being providers of credit and will be consolidated at every negative leg of the business cycle.
Real-time payment networks with messaging allow companies to send customers request for payment and establish a connection via their bank, cell phone number or email. It allows money to move more freely, faster and with more control. A faster payment system will enable both banks and their merchant customers to drive the customer experience similar to how Uber has while better managing cash flow – the lifeblood of any business.
It is time for banks to start planning for the future and think about how they will restructure their business model to survive in a world where payments are in real-time. In the next three years, there will be a radical shift for both households and businesses on how they handle payments and checks will be the first to go. Along with that, products like overdraft, lockbox, merchant services, debit cards and dozens of other products will be eliminated or radically altered. Banks that plan to survive need to start changing immediately in order to adapt. While checks might still contain drama and be funny to joke about, they are also a harbinger of our demise if we don’t take seriously.
Submitted by Chris Nichols on April 15, 2019