Checkless Society

What Is a Checkless Society?

The term "checkless society", also known as "cashless society", refers to a hypothetical future in which all financial transactions are processed electronically. This would eliminate the need for any paper transactions, whether they be paper bills, checks, or even metal coinage.

Many observers have predicted the arrival of a checkless society for some time, yet actual progress toward this state has been slower than expected. While the prospect of losing a national, physical currency may seem dramatic, proponents of a no-cash economy aren’t just fans of the latest cryptocurrency to flood the market. Some experts believe that cash actually assists some of the darker corners of our economy, and eliminating it could help cut down on crime that relies on traceless financial transactions.

Understanding Checkless Societies

Today, checks remain a widely used method for making larger payments, such as rent, payroll, and real estate purchases. For individual consumers and small business owners, checks are a more accessible form of payment than wire transfers, which often involve large fees. Checks also have the advantage of providing an evidentiary trail, which can be beneficial for consumers or businesses who may need to prove that the given payment was made.

Yet despite these advantages, many financial institutions would prefer operating purely through electronic means. Doing so could enable substantially faster processing times and could help reduce overhead costs by reducing the need for human personnel.

Although checks and other physical methods of payment remain widespread, there is evidence of their long-term decline. For example, a 2013 survey conducted by the online payment platform WePay found that over 50% of millennials do not use checks at all, and that more than 60% of consumers write fewer than three checks per month. That same year, the U.S. Postal Service (USPS) reported that, while 91% of USPS customers receive their bills in the mail, only 37% of those customers pay their bills through the mail.

The Rise of Crypto

Cryptocurrencies like bitcoin seem like a good alternative, but they present practical, technical, and regulatory challenges. Cryptocurrencies are systems that allow for secure payments online which are denominated in terms of virtual "tokens," which are represented by ledger entries internal to the system. "Crypto" refers to the various encryption algorithms and cryptographic techniques that safeguard these entries, such as elliptical curve encryption, public-private key pairs, and hashing functions.

Designed with privacy in mind, these currencies are not beholden to any specific country and are therefore trickier to regulate. When new regulations are implemented, they could be subject to increased volatility which can — at least temporarily — make them potentially riskier than cash or check.

Examples of a Checkless Society

Scholars, financial experts, and others have been predicting the onset of a checkless society for decades. Writing in 1968 for the American Business Law Journal, for example, Indiana University professor James A. Barnes spoke of the legal ramifications of a society in which consumers no longer used cash or checks to pay for purchases. In 1996, the U.S. government reported on the growing impetus to replace paper checks with electronic payments.

The current transition to a checkless society has not been as fast and easy as many had anticipated. It has taken decades for many older customers to warm up to current automated services, such as automated teller machines (ATMs) and chip-enabled debit cards.

Many elderly consumers continue to rely on checks simply because they do not understand newer payment technologies, or they regard them with suspicion. For instance, a U.K. plan to phase out checks in the country was discontinued when it was discovered that 46% of the nation's elderly still relied on checks as a form of payment. And checks are still used in business-to-business (B2B) transactions; as of 2019, checks continued to account for 42% of B2B payments, but down substantially from 81% in 2004. For personal expenditures, a 2020 report commissioned by the Fed found that only 7% of transactions overall in 2017 and 2018 were carried out by check.