Small Business Check Usage Study (2018 data)

July 22, 2018

In the first study of its kind, Biz2Credit evaluated check usage of small and medium businesses (SMBs) and found that despite the growing prevalence of online banking, small companies write eight times as many checks as their retail customers. SMBs issued an average of 406 checks per year compared to retail customers, who write around 50 checks per capita per year.

13%

FIRMS UNDER $250K IN
ANNUAL REVENUE

15%

FIRMS HAVING MORE THAN
$5M ANNUAL REVENUE

For this study, Biz2Credit analyzed the bank statements of more than 18,000 companies across multiple industries. The analysis covered 2.2 million expense transactions totaling $2.8 billion made by firms that uploaded primary data onto Biz2Credit's online small business finance marketplace.

Interestingly, check issuance increases systematically with the size of the business. Companies with less than $250K in annual revenue issued 133 checks per year on average, while firms with more than $5M in revenue issued more than 1,100 per year on average, roughly 4.4 checks each business day.

28%

BY LARGE BANKS
(>$250 BILLION IN ASSETS)

33%

SMALL BANKS
(<$1 BILLION ASSETS)

Younger owners of small businesses (aged under 35 years) issue far fewer checks than business owners aged 55 or over (on average, 238 versus 641 per year). However, this partly reflects the fact that younger business owners are less established and have a lower revenue, which is associated with lower check usage. Among business owners under-35, only 17% of all debits by volume are paid by checks, while for over-55 owners, 41% of business expense items are paid by check.

Check usage varies widely by industry. The lowest usage is within information technology (IT) and professional services businesses (13% and 19% respectively) while the highest is within the construction industry (47%).

"Small business are true holdouts. Many times, they use checks as a way of controlling cash flow," said Venkatesh Bala, PhD, Chief Risk Officer for Biz2Credit, who conducted the study. "Issuing checks provides a built-in delay in the payment of vendors and employees, whereas online transfers and direct deposits move the money directly into other bank accounts immediately."

"Small business owners continue to use checks for many reasons, including for more effective cash management and, in employer firms, as a way to exert oversight and control over expenses," said Biz2Credit CEO Rohit Arora."

"Banks seeking to lower check processing costs and to cut check fraud for their SMB customers should investigate alternative electronic payment technologies that can provide these and other benefits."

While check usage by volume rises with the size of the business (13% for firms under $250K in annual revenue versus 54% for firms having more than $5M annual revenue), usage by value peaks at a revenue range of $1M to $3M. This indicates that smaller SMBs use a small number of checks for a large share of their expenditures, while larger SMBs use checks broadly, including for relatively small expenses.

The study characterizes check usage by the asset size of the SMB's primary bank relationship. Despite large investments in digital and other technology by large banks (>$250 billion in assets) their value share of checks is 28%, compared to 33% for small banks (<$1 billion in assets).

About Biz2Credit

Founded in 2007, Biz2Credit has arranged more than $2 billion in small business loans and has several times been named to Crain's New York's Fast 50. The firm was ranked among the top 200 fast-growing companies on Deloitte's 2017 Technology Fast 500.

Biz2Credit is expanding its industry-leading technology in custom digital platform solutions for leading banks and other financial institutions, investors and service providers in the U.S. Visit www.biz2credit.com or follow Biz2Credit on Twitter: @Biz2Credit, Facebook, and LinkedIn: https://www.linkedin.com/company/biz2credit-inc.