Declining check use forces cutbacks

Check printers are closing plants as people find newways to pay bills.
KANSAS CITY, Mo. (AP) -- Consumers such as Gretchen Schultz are the scourge of companies that print checks.
Schultz wrote 10 checks in May, about half the number she used to write because she does more of her banking online. Some months, she writes fewer checks than that.
"I can get all my bills paid in five minutes on the computer," said Schultz, a Web technician at the American Academy of Family Physicians.
With a growing number of consumers such as Schultz discovering the convenience of paying bills online and shopping with debit cards, the firms that turn out billions of checks a year are being forced to retrench.
Deluxe Corp., the nation's leading check printer, is closing a plant in Anniston, Ala. The Minneapolis-based company, which saw check sales drop 6.5 percent last year, has also closed or is in the process of shuttering three other printing plants, in San Jose, Calif.; Pittsburgh and Indianapolis. Business from those plants has been shuffled to other plants.
The second-largest printer, Atlanta-based John H. Harland Co., is reorganizing its printed products division after sales dipped 5 percent last year. Harland plans to cut the number of its plants to nine from 14.
Industry officials say the cutbacks are due in part to automation, and note that the economic downturn sapped demand. But they also acknowledge that consumers are increasingly forgoing checks in favor of other options.
"It's related to productivity and process improvements as much as it has been to a gradual decrease in check use," said Stuart Alexander, a spokesman for Deluxe, which still has 10 plants.
Study
A Federal Reserve study found that the number of checks written in the United States has fallen since it peaked in the mid-1990s. There were nearly 50 billion checks written in 1995, and by 2000, that number had declined to 42.5 billion. Check usage is expected to drop 5 percent in 2004.
Utilities, credit card companies, mortgage lenders and even the IRS are increasingly recommending that people pay bills over the Internet, especially as encryption technology has improved security. In a study released in December, the Pew Internet and American Life Project said 34 million Internet users in 2002 had reported at least trying online banking, up from 15 million two years before.
Shoppers are also increasingly using debit cards, to the tune of 495 million transactions a month. Combined with credit cards, card usage recently surpassed checks as a payment method in the marketplace, said David Robertson, publisher of The Nilson Report, which tracks consumer spending trends.
But the check has its defenders, who say concerns with security and people's personal finance habits will keep paper checks a viable option for years if not decades.
"I don't know how many years that people have been saying checks are going away," said Wade Delk, executive director of the Check Payment Systems Association, a Washington, D.C.-based trade group.
Delk said his organization has commissioned studies showing that more than two-thirds of respondents favored paper checks over other methods.
Still, most companies that do check printing are diversifying into other products and services to bring in revenue.
Harland saw an overall increase in revenue to $787 million last year thanks to Harland Financial Solutions, a subsidiary that provides software and technical services to banks and other financial institutions.
Deluxe said recently it plans to acquire New England Business Services Inc., a Groton, Mass., provider of office supplies and other products.
"We think it will be a gradual decline," said Alexander, the company spokesman. "We don't think checks will fall off a cliff."