Dont look now, but paper checksthose symbolic instruments of financial empowermentare slipping away toward that same graveyard of technological obsolescence as the slide rule, the typewriter, and the record player.


Financial institutions here say the rectangular slips of custom-imprinted, coded, and sometimes flourishingly inscribed pulp are falling out of favor among their customers and, when used, are being converted more quickly into electronic data.


Though exact figures are hard to come by, they say the number of checks theyre processing is shrinking each yeartypically, by at least a few percentage points, and in some cases, by much moreeven as overall transactions are rising.


They attribute that receding volume mostly to rising consumer and business acceptance of various electronic modes for moving money, from debit cards and e-checks to direct deposits and online transfers, but say federal regulations and security concerns also have accelerated the trend.


Were opening a lot of accounts where people dont even want checks, especially young people, says Steve Dahlstrom, president and CEO of Spokane Teachers Credit Union, the Spokane areas largest credit union.


WesCorp, of San Dimas, Calif., which processes checks for a large number of the credit unions here, says its Northwest volume fell about 10 percent last year and is expected to fall about that much again this year.


Two years ago, WesCorp bought the Spokane-based Credit Union Support Services, which formerly had been processing those checks and had been started by a group of credit unions here.


Byron Edgett, president and CEO of Spokane Federal Credit Union, says the number of checks being processed for that group of credit unions peaked at around 2.5 million a month four or five years ago, but had fallen to about 1.7 million a month by the time Wescorp took over the operation.


The number of checks processed by Spokane-based Washington Trust Bank plunged from more than 17.9 million in 2000 to about 9.5 million in 2004, before rebounding to about 15.9 million last year.


Janeen Van Slyke, the banks director of operations, says last years rise, though, was due to bank expansion and the opening of new branches, rather than to increased check use by current customers.


Year over year weve been seeing a decrease while the bank has been growing, she says, adding that she expects the downward slide to resume.


Wells Fargo Bank has experienced more than a 16 percent drop in processed checks in Washington and Oregon just between 2001 and 2005, says Boise-based bank spokeswoman Amy McDevitt.


We anticipate that the check volume will continue to steadily decline, she says.


Mitch Christensen, a Scottsdale, Ariz.-based executive vice president for enterprise payment strategies with Wells Fargo, emphasizes that the number of checks being processed is falling more rapidly than the number of checks being written.


That, he says, is because many more of the checks now being written are being converted into electronic images or information rather than being processed in paper form.


Nevertheless, he says, We dont see anything on the growth side of checks.


The trend here and regionally mirrors whats happening nationally.


Cash and checks now account for only 45 percent of consumers monthly payments, down from 49 percent in 2003 and 57 percent in 2001, according to a major study of consumer payment preferences released last fall.


Similarly, consumers now are using checks for only 49 percent of their monthly bill payments, down from 60 percent in 2003 and 73 percent in 2001, the study found. (See survey story, page B6.)


Online bill pay, meanwhile, is experiencing a huge increase in consumer usageleaping to 24 percent of monthly bills paid last year from just 8 percent in 2001, according to the study. It also found that consumers now make one-third of their in-store purchases with a debit card, compared with 21 percent six years ago.


Electronic tsunami


An article last month in the American Bankers Associations online ABA Banking Journal portrays the unfolding transformation in payment services as a looming electronic tsunami.


It cites a prediction that the Federal Reserve will be processing only about 2.5 billion checks annually by 2010, down from 40 billion in 2003, and says institutions face strategic and competitive challenges as they seek to respond to the market shift toward electronic transactions.


Some financial-industry executives here say they believe that the sweeping Check 21 banking law enacted in October 2004 will help drive nails into the paper-check coffin.


That law, formally called the Check Clearing Act for the 21st Century, allows institutions to exchange checks electronically through digital imaging, negating the need to transport and process paper checks physically, as traditionally has been done.


It also establishes substitute checks, made from digital copies of the original checks, as legal equivalents of the originals.


The law was established to reduce the time, risks, and costs associated with moving, clearing, and returning paper checks.


Though its implementation has been going slower than expected due partly to high conversion costs, industry representatives predict that as the number of paper checks being transported from place to place shrinks, economies of scale will cause per-item costs to rise, further discouraging the use of checks.


Checks remain the preferred mode of payment for business-to-business transactions, but there, too, the landscape is changing.


Theres considerable online speculation, for example, about prospects for increased business use of whats called accounts-receivable conversion.


Thats a process by which corporate checks can be converted into Automated Clearing House (ACH) Network debits at electronic lockboxes that banks operate for their corporate clients.


One of the allures of the process is its potential for reducing accounts-receivable expenses.


By having their customers send payments directly to a lockbox, businesses theoretically can avoid having to log or scan checks, fill out deposit slips, and go to the bank to make deposits.


Only consumer checks were eligible for such conversion until last November, when NACHAThe Electronic Payments Association adopted a new rule opening the process up to some corporate checks.


NACHA represents more than 11,000 financial institutions and develops operating rules for the ACH, a nationwide electronic-funds transfer system, as well as for various types of electronic payment.


NACHA estimated there were 1.25 billion consumer checks converted into accounts-receivable conversion payments in 2004, and it expected that number to surpass 2 billion last year, making it the fastest-growing payment application in the ACH Networks 33-year history.


Whether or not businesses embrace the accounts-receivable conversion process, some industry observers say they expect that businesses eventually will be forced to convert to electronic transactions as check-processing costs ratchet upward.


The move away from paper checks is just fine with Spokane Federals Edgett, who refers to them as an antiquated payment system.


Aside from just the cost savings of not having to deal with the paper, he says, When you consider the security risk of that paper floating around, with those numbers that are so easy to read, I see that as accelerating the decline of paper checks. I think its more secure to do business in other ways. I think thats going to be the death knell of checks.


Also, as the check volume continues to decline, Its going to get so expensive to process them that I think its going to get cost prohibitive.


Despite their ominous outlook, he and other industry executives here dont expect checks to disappear altogether, at least not in their lifetimes.


Wells Fargos Christensen says, Well have checks written and checks processed in this country for decades to come, though at a fraction of the current volume.


Also, Edgett, says, Theyll always be called checking accounts. We already are starting to refer to them more as transaction accounts, but to change the consumers terminology would be impossible.