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11/17/2015

Talks with a Millennial: Why Do We Need Checks?

Wendy Blaeser November 17th, 2015

The majority of Millennials predict that within the next five years, the way they pay for things and access their money will change completely, and a new offering from a payments sector disruptor (such as Google, Amazon, PayPal or Apple) would be far more exciting to them than anything their banks have to offer. Those stats from the Millennial Disruption Index could paint a bleak picture for the future of checks — unless banks act quickly to educate younger consumers as to why they still need traditional checking products.

A conversation with Deluxe’s intern, Jeziel De Jesus Vega, provides some insight into how the members of the generation of the future view the concept of traditional checks and checking accounts. Jeziel is a senior at Mounds View High School in Minnesota, and interns with Deluxe through our partnership with Genesys Works, a non-profit organization that enables high school seniors to break through barriers and discover their potential through meaningful work experience.

Jeziel:Jeziel De Jesus Vega

It wasn’t until I was a junior in high school that I truly understood what checks are and how to use them. In my mind, checks were used to pay for stuff you didn’t want to use your cash for. I’ve only seen my parents and grandparents write checks and only in certain situations. To me, checkbooks have always been just little notebooks.

I honestly do not have any checks, nor have I written a check. Never. In fact, when I opened an account in Minnesota and Puerto Rico, I was never offered checks and I have never owned a checkbook.

Why do I need checks?

I’ve gained some financial knowledge from working at Deluxe and I now understand that checks can be a good way to pay bills. Although check usage is declining overall because of online banking, people still use checks to pay for cars, loans and college — all things that are very important to my generation and our future.

With online banking, someone could hack into your account, so checks can be safer. They’re also a good way to keep track of your transactions on paper. On the other hand, checks are a very slow method of payment and it could take some time for a check to be processed. Plus, there are plenty of other ways to pay bills, like online banking, debit cards, credit cards, PayPal and other digital payment methods.

Still, I have to wonder what advantages checks provide me besides keeping track of the transaction.

Nearly a quarter of Millennials (also known as Generation Y) are just like Jeziel — they have never written a check, according to a Western Union study. Sixty-four percent receive 50 percent or more of their bills digitally, Western Union found. And a Gallup poll found that 72 percent of Millennials use online banking weekly. But it’s not as if people aren’t interested in checks. As Glen Sarvady pointed out last week in his blog, the number of Google searches for “how to write a check” has actually increased nearly five-fold despite the fact that the number of checks Americans have written over the past 10 years has declined. So far the banking industry has done little to prove to Millennials that checks are still a viable payment option for them so is it any wonder that 18-year-olds aren’t writing checks today, and are turning to other methods, like Apple Pay, Venmo, PayPal and Square Cash, to pay their bills?

The right combination of product offerings, however, could fulfill the occasional need Millennials may have for checks while leveraging new revenue streams for financial institutions. Research by Synergistics Research Corp. points to the idea that alternative products like digital checking accounts, prepaid cards, money orders and check-cashing services could meet the needs of Millennials while presenting additional revenue opportunities for financial institutions.

Some national banks have begun offering check writing services with prepaid card accounts. By tying a traditional product to a non-traditional one that Millennials already favor, financial institutions have an opportunity to further illustrate to the generation the value of checks.

Issuing prepaid cards with check writing services has several advantages, including:

  • No credit qualification to open an account. Millennials typically have less credit history than older generations.
  • No link to personal financial information. The personal information contained in checking accounts is vulnerable to malware and hackers.
  • No overdraft fees.
  • No minimum balance requirements, so the card-holder has more money available to spend.

Relationship rewards programs could be another way to convince Millennials of the value of having a checking account with your financial institution. We know successful rewards programs positively affect customer perceptions of a financial institution. In fact, checking account holders widely report they’re aware of relationship rewards programs tied to their checking accounts, and nine in 10 view the programs as valuable. Awareness peaks among account holders ages 18–34.

FIs would be wise to offer a variety of options and value-added services tied to checking accounts to attract this generation. Show Millennials you understand them and care about what they want to secure their business for the long haul.