A brief history of checks
There is evidence of checks as far back as the third century BC in India, where the Maurya Empire used an adesha, which was an order that a banker would use to pay a third party. There is also compelling evidence of praescriptiones, a pre-cursor to the modern check, being used in ancient Rome in the first century BC.
In the third century CE, the Persian banks began issuing sakks, and by the ninth century these paper documents could be used across the caliphate by traders to deposit and withdraw money in different countries. By the 1500s, Dutch cashiers would, for a fee, hold people’s money and pay it out to third parties based on a note from the account holder.
The modern check as we know it was becoming fully formed by the 17th Century in England, and the first printed check was issued in 1762 by Lawrence Childs in London. As early as 1681 checks were being used in the USA by cash-strapped Bostonians mortgaging their land, and soon printed checks were the norm, as a way of reducing fraud.
Checks in the 21st Century
It is estimated that in the USA companies pay around 50% of their bills by check. This is down from 74% in 2007, suggesting that despite some reduction, many firms are resistant to adopting the new payment methods available to them. One of the reasons for this is the long history of using checks, and they know it works.
Each check can currently cost anywhere from US$4 to US$20, including printing, writing, signing, shipping and reconciling. It is estimated that in 2010 the simple act of issuing and depositing checks cost US businesses between US$26 billion and US%$ billion.
Could this money be better used elsewhere? And does this mean that checks are out?
Not necessarily. Whilst many individuals will think nothing of using Apply Pay to purchase a coffee, or pay their bills online, there is something comforting and traditional about paying by check. But this does not mean that there cannot be changes to business checks. There have been advancements in technology, and businesses can now use an electronic platform to generate, write, sign and send checks, reducing the associated fees.
This new technology also helps reduce fraud and ensure businesses’ money is kept safe. For example, checks generated electronically has several layers of protection, including heat sensitive paper that prevents photocopying, watermarks that prevent forgery, and a security coating to prevent tampering, to name but a few features.
Business vs Personal checks
Whilst the use of business checks has continued in the US, there has been a significant decline in the use of personal checks. According to the Federal Reserve, consumer use of checks has declined from around 40 billion in 2000 to 17 billion in 2015. This means that, on average, each American gives or receives 38 checks a year. Those who use checks more tend to be the elderly, who may not have access to the new tech-based payments like Venmo and PayPal, and those in more rural areas who are using checks to pay for basics like gas and groceries.
Business checks and personal checks are also quite different to one another:
- A personal check is drawing from an individuals’ account, a business one is set against the company
- Personal checks are smaller, business checks on the other hand tend to be bigger
- Cashing a personal check is also a lot easier, as the individual is named in the payee line
- A business check may be cashed or deposited: cashing a check may be more difficult as only a specific individual can cash it, but anyone can deposit it
- Business checks made out to a business can be more complicated to cash