The Future of Check Processing in the US

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27 October 2004


New York, NY, USA October 27, 2004

Celent expects paper check processing to nearly disappear in the US by the end of the decade. Image exchange of transit checks will grow from more than 14 percent in 2005 to 61 percent by 2007. By 2010, more than 93 percent of transit items will be image-exchanged.

In a new report, , Celent examines the significant transformations affecting the American check processing industry. The report scrutinizes the path of adoption of image processing, the fate of check conversion to ACH (often seen as a rival alternative to image exchange), and the prospects of technology vendors, third-party processors, clearing houses, and image exchanges.

Among other key findings, Celent expects the total volume of checks presented to amount to 38 billion this year and to gradually slide down to 24 billion by 2010. The decline in checks processed will accelerate over the next two years as check conversion takes a bite out of volume, but conversion and truncation will not share the check processing roost forever. By 2006, Celent expects that check clearing fees will either level with ACH clearing fees or come close enough to justify switching gears from ARC to check image exchange. ARC volumes are expected to peak by 2007 at 3.5 billion and then fall to 2.6 billion by 2008. By 2010, ARC will be a marginal item in the ACH network. "Given the sheer volume of checks and the number of financial institutions involved in the switch to image exchange, the transition period is expected to last at least six years," comments

Alenka Grealish, coauthor of the report and manager of the banking group at Celent.

On the competition front, Celent anticipates further consolidation among software, hardware, and processing outsourcing providers. Dwindling check volumes around the world, and in recent years the US, have already adversely impacted the revenues of check processing technology vendors. Having plummeted from US$2.3 billion in 2001 to US$1.6 billion in 2004, total industry revenues should continue to decline to US$1.2 billion by 2007. "Consolidation will benefit a small group of software vendors and top-tier third-party outsourcing providers," says

Gwenn Bézard, senior analyst and report coauthor. "Top performers will likely grow their revenues by 510 percent annually in the next few years."

The 42-page report contains 29 figures and 4 tables. A

table of contents is available online.

of Celent Communications' Retail Banking and Wholesale Banking research services can download the report electronically by clicking on the icon to the left. Non-members should contact for more information.

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Corporate Banking, Retail Banking
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