Large financial institutions can gain cost efficiency and operational flexibility

As long as the industry continues to print checks, large financial institutions have no choice but to rely on item processing as the back-office engine that must keep running.

But as check volume decreases, the operational burden can gain weight. According to the Federal Reserve, U.S. check volume dropped to 688 million in the fourth quarter of 2025, marking the lowest point in the past 36 years. The volume hasn’t topped 1 billion since the fourth quarter of 2019.

Still, checks won’t disappear quickly. A 2025 Association for Financial Professionals report found 91% of organizations still use checks, though only 10% use them for more than half their payments.

So the long relationship between large financial institutions and item processing will continue. But it doesn’t have to be the same if institutions ask themselves a critical question: At what point does maintaining specialized infrastructure, staffing, compliance controls and technology for a shrinking workload stop making strategic sense?

When large financial institutions reach that point, they can turn to an item processing partner to handle all the back-office work. There are three reasons why outsourcing can work in an institution’s favor.
 

1. Outsourcing can introduce cost efficiency

As check volume falls, large financial institutions can lose economies of scale, which increases the per-item cost of maintaining processing operations.

While per-unit prices rise, those institutions still have fixed costs for equipment, facilities and staffing. A national financial institution, for instance, could have multiple item processing centers for regional disaster recovery, and every aspect of the operation carries a cost, whether for training operators or staffing a second shift.

Outsourcing partners can offer infrastructure, software, development teams and technicians. The software can handle high volume at a low computing expense and support thousands of financial institutions.

That reintroduces economies of scale. A partner can compress its pricing so institutions may realize savings depending on volume, service scope and contractual terms. Financial institutions now can get fixed pricing so they can forecast what the cost will be.

A large financial institution does item processing because it must. That’s an expense to the bottom line.

An outsourcing partner is motivated to take on as much volume as possible as efficiently as it can. That can support a more predictable cost model.

2. Large financial institutions can gain operational flexibility

Item processing can appear straightforward. But lurking just below the surface are tasks that, taken together, can strain a financial institution’s operations. 

The institution must manage the server, failovers, redundancies, cybersecurity, penetration testing, patching and upgrades. In many cases, the software large financial institutions use is old, the response times are slow and it’s difficult to get new fixes.

Institutions also face the constant threat of check fraud. The Association for Financial Professionals report found 58% of organizations experienced check fraud, underscoring how the payment method is a prime target for attacks.

A large financial institution might have image-enabled ATMs, teller capture, mobile capture and devices for merchants that can capture a deposit. Behind that is an aggregation point where all those channels come in, and financial institutions must gather all the images, create and send out cash letters, and archive the items for seven years.

There also is additional pressure – including privacy, proper handling and mobile deposit accuracy – that requires support on the back end. An item processing partner can relieve that pressure by taking over the aggregator role and giving institutions more operational flexibility. 

When large financial institutions outsource item processing, they can maintain control of the upfront capture. The partner works behind the scenes to aggregate the images, conduct the clearing, support fraud-related processing controls, send cash letters, handle archiving and send extracts to feed other systems, such as positive pay. 
 

3. The institution gains freedom to focus on core competencies

Item processing can be a distraction for large financial institutions, whether through the operational burden or maintaining proper staffing as people retire.

Financial institutions earn revenue through lending and business banking, not by processing a check. Processing is simply the byproduct of banking, and it can be a loss leader for the institution.

Financially, it makes sense for large institutions to direct their resources toward revenue generation, such as through new branches and services. When they’re focused on item processing, large financial institutions are paying people to work in the back room tracking deposits rather than in the front of the house helping consumers.

A partner can free financial institutions to concentrate on their core competencies and other lines of business that aren’t declining in the same way as item processing. 
 

A new approach to old technology

Item processing is a necessary engine for large financial institutions, but it’s hard to keep it running with waves of cyber scrutiny, compliance requirements and upgrades to software and servers.

An item processing partner can help large financial institutions shed that weight with a fixed budget. A partner, rather than the financial institution, can be the one to process items until the last check clears.

Financial institutions remain responsible for appropriate oversight of outsourced activities.