Politics of Payments
Got customers still using paper checks? All FIs must also dig deeper into what customer problems they are trying to solve to move them to new payment methods.
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When one brings up payments, one brings up politics. No, not that kind. The other kind. That tribalism and evangelism around a specific method, brand or type. Crypto, bitcoin, Zelle, digital wallets, Apple Pay, iDEAL, Cash App, Ayden, Klarna, Wise… There’s only thing everyone agrees on: Everyone hates on the paper check.
And honestly, most weeks years, most of us don’t think about or use paper checks. Folks outside the US never think about them unless they are waxing nostalgic for some reason.
For those who don’t know, my financial services journey started in check processing. My early analyst work was on this topic. I was a go-to analyst on Check 21. So when checks hit the news twice in a single week, I have to write about it.
A US Cabinet member's purse was stolen. It contained cash & paper checks. She's not a boomer.
Joe Gregory posted that Association for Financial Technology reports that hashtag#SMB use of paper checks are up. The writers of these checks can't all be boomers.
These two pieces of news had something in common:
Some people like to use a variety of payment methods & aren't entirely ready to give up the old ways just 'cuz they use the new methods.
How & why people use payment methods is based on more their age demographic - on other variables, needs, preferences that probably aren’t apparent to their banks.
These two pieces of news tell me that financial institutions still have two jobs before them:
Find out why small businesses are writing more checks. Why do SMB owners view digital payments are more risky than checks? Why do your SMB customers continue to use paper checks? The AFP admits that it doesn’t understand their survey results.
While it is unclear why check usage increased somewhat dramatically in 2024, some organizations may have been misled into thinking that check payments are safer than digital payments,” the report said. “This view is clearly false after reviewing the data collected” in the annual report since 2015.
Uncover reasons why some consumers still use paper checks - even though check usage continues to drop. What activities are they doing that they chose to write a paper check? For example, are grandparents and others sending checks to grandchildren or other relatives?
Sure, you may have done research into consumers and digital payments years ago, when debit purchases lagged checks & mobile payments were a dream.
The check problem is, of course, an issue for US-based FIs. But financial institutions outside the US also have payment innovation projects underway that they will want to introduce to customers. All FIs must also dig deeper into what customer problems they are trying to solve and how they currently solve them.
Takeaways
Step out of the politics of payments. Customers who use older payment methods (or branches for that matter) won’t change because you lecture them or force them to use a new method.
Don’t assume those small business owners who don’t use digital payments are older. Forget your SMB demographic categories and look for niches of customers.
Likewise, don’t assume that all consumers who still use checks are 60 or older.
Get data on the way your customers use payment methods - and not just those that are offered by your bank.
Review data on customer usage of your digital payments. Which types of payment methods are successful? Who uses them? Who does not? Do you have any data that tells you why customers do or don’t use payment methods? If not, it’s probably time to hit the field and talk or survey customers.
Create products & launch them in a way that shows customers how and why to use a new payment method. Show customers how a feature or capability can help them do their job more easily, faster, cheaper, etc.
Take steps now to up your proactive fraud detection game for checks but also other types of payments. Look for providers who have the technology to to proactively detect and analyze payment fraud across payment methods and better protect customers.
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Who writes PivotAssets?
I’m an independent analyst, strategic advisor & consultant (& a former Gartner analyst). I’ve worked in and covered the banking industry for over 2 decades.
This newsletter is designed to challenge you & to give you a fresh perspective & analysis on the transformation that is —and isn’t happening - in the industry.
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Me, Elsewhere
Ivo Spigel & Nick Holland and I are working on FinVino, which will debut in May, 2026.
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I’m an expert advisor at Third Eye Advisory. Ready to help your company or financial institution:
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Build Product Innovation & Differentiation
Create Strategic Intelligence for Investors.
I spoke with Theodora Lau and Barb Maclean on their podcast One Vision about smart banking & hidden tribes.