Paper checks and check guarantee services are like everyday things that keep running and running: the iconic rabbit from the battery commercials, the backup fridge in the garage, the commuter car from way back when, and the guy in the movie named after a bunch of trees. Despite Fintechs saying they are "old and in the way," traditional checks keep millions of American businesses running and running.
Furthermore, a few financial prognosticators also predicted checks were going to be obsolete decades ago. Nevertheless, paper checks continue to prevail. As a famous author once said, “the rumors of my demise are greatly exaggerated.”
Why do checks keep running and running, and what role do check guarantee services play in their success?
Recent Studies About Check Payments
A handful of studies and reports indicate that checks are preferred by consumers for certain transactions and most B2B payments. Here are a few of the more notable research projects:
- The Federal Reserve Payments Study: 2018 Annual Supplement — “Large-institution check payments increased 7.5 percent by value from 2016 to 2017, opposite the decrease from 2015 to 2016.”
- October 2018 webinar by PYMNTS.com — “Sixty-four percent of B2B payments are still made with checks.”
- The 2017 Diary of Consumer Payment Choices report by the Federal Reserve Bank of Atlanta (September 2018) — “Consumers tend to use cash and cards for lower-value transactions, and electronic payments and checks for higher-value transactions.”
- The Q3 2016 SMB Technology Adoption Index (the most recent version) — “Ninety-seven percent of small and medium-sized businesses (SMBs) responding to the survey still rely on paper checks to make and accept B2B payments — a one percent improvement since Q1.”
What Are Check Guarantee Services?
Check guarantee services safeguard merchants from accepting returned checks for reasons such as fake or closed accounts, insufficient funds, and stop payment orders.
Why Are Check Guarantee Services Needed?
Since cash is rarely used for high-dollar purchases in today’s business space, the vast majority of those purchases involve card or check payments. For the latter, only drawee banks can verify if there are sufficient funds in a checking account and it must be in real time while the merchant is literally standing at the teller window.
This scenario is obviously impractical for transactions such as buying cars, home furnishings, or home repairs where merchants accept checks that are deposited after the sale. In these situations, merchants accept checks on good faith or with some type of guarantee that the checks are good. Enter check guarantee services.
Like the warranties that protect individuals from occurring loss, check guarantee services protect merchants from the impending loss of accepting checks that might be returned unpaid from their financial institution.
How Do Check Guarantee Services Work?
Check guarantee services are provided by check guarantee companies that specialize in making calculated risks.
Check guarantee vendors have access to an enormous amount of information that enables them to assume the risks that would otherwise be borne by merchants. These factors include assessing the authenticity of what is printed or not printed on the checks as well as proprietary and subscription databases in the areas of returned checks, checking account histories, checking account status, the check writers themselves.
This is the essence of check guarantee services and explains how vendors are able to stay in business and turn a fair profit.
How Much Do Check Guarantee Services Cost?
The fees for check guarantee services generally include monthly service plans and per-item transaction fees that vary according to a merchant’s industry, the number of checks they deposit each month, and the total amount of unpaid checks they accept over a specific period of time.
Check Guarantee Services by CrossCheck
Founded in 1983, CrossCheck is the leading privately held check guarantee company in the nation. It offers the highest check approval rates in the industry and its Check Guarantee services are more cost effective than card processing services. Two type of services are offered:
Standard Check Guarantee — merchants approve checks via phone, POS terminal or the CrossCheck web portal before making a deposit. If any are returned from the bank unpaid, merchants mail them to CrossCheck for reimbursement.
Electronic Check Guarantee — merchants scan checks with digital imagers before submitting them to CrossCheck via its web portal or a terminal. Merchants often receive funding within 48 hours without leaving their place of business.
Many merchants use CrossCheck FOCUS, a free desktop app, to approve checks without web browsers.
Download our free guide to learn how CrossCheck’s Check Guarantee services can help your business increase sales and mitigate risk while saving time and money.