Payments

Cheque processing centres in the US cut from 45 to 18

Check 21 in the US, and TECP in Canada is all the more critical as we watch cheque volumes decline significantly.  The US Federal Reserve has already reduced their number of processing centres by half, but processing centres should be eliminated or at least reduced to one.

Finextra: Fed closes more cheque processing centres; cuts 130 jobs

Since 2003 the Fed has cut the number of cheque processing centres in the US from 45 to just 18 as more consumers and businesses continue to switch from paper to electronic payments.

The Fed says its most recent study shows that about 37 billion cheques were paid in the US in 2003 – down from 42 billion in 2001 and 50 billion in 1995 – and warns that further restructuring will be necessary as volumes continue to decline and as more depository institutions begin to collect cheques electronically following the introduction of Check 21.

2 thoughts on “Cheque processing centres in the US cut from 45 to 18”

  1. You mention “…but processing centres should be eliminated or at least reduced to one”. Are you suggesting that the FED (or any other large processor like Bank of America) should only have a single cheque processing site? Perhaps you are suggesting an ideal…Even under aggressive Check 21 adoption rates, industry experts are still predicting that well over 10 billion cheques will be cleared end to end in the US as paper in the 2009-2010 timeframe. Unless there is a drastic and wholesale change in consumer behaviour and very rapid adoption of technology by all processors and paying banks, the FED (and others) will still need a few processing centres.

    Realistically, adoption of Check 21 will be fast, but gradual, and as the economics of processing paper change (unit costs for most processors will increase as volumes decline), you will see some players convert to a variable cost model by exiting the processing business and outsourcing and some (perhaps) larger players aggregate remaining volumes so as to make the processing business economical.

  2. Agreed that cheques will be around for a while. My thought was that given the fact that cheques will never go up, that cost containment in managing the cheques should be a key target.

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