However the slow take up of electronic payments for business to business (B2B) transactions means that cheques will remain a major player for the foreseeable future.

Figures from TowerGroup and the Federal Reserve show that cheques have lost their dominance of the payments market, shrinking from a 46% share of total non-cash payment volume in 2003 to 31% in 2006.

TowerGroup says this fall has been driven by a desire among consumers to be able to pay bills and make purchases in faster and more convenient ways.

This is demonstrated by a surge in the popularity of ACH payments, which grew at a compound annual growth rate (CAGR) of 20.4% from 2003 to 2006, accounting for 15% of transaction volume in 2007. Similarly, debit card transactions grew from 18% of payment volume in 2003 to 25% in 2006.

Online bill payments grew even faster - at a CAGR of 29.6% from 2005 to 2007. TowerGroup predicts that growth will continue until at least 2012, although at the slightly slower rate of 18.7%.

With the popularity of P2P and P2B cheque payments waning, B2B payments remain the "last bastion" - making up nearly 60% of US cheque dollar value, says TowerGroup.

Towergroup says many businesses continue to use cheques for both large and small payments because they have no choice - their payees lack the IT necessary to receive electronic transactions or simply do not accept e-payments.

Andrew Schmidt, research director, TowerGroup global payments research practice, says: "As cheque volumes continue to decline due to consumer and business demand to simplify payments processes, financial services institutions must work to make it easier for companies to process and receive electronic payments."

Cheques are still far more prevalent in the US than most other countries. Earlier this year the UK's Payments Council delivered its first national payments plan which includes proposals for the "managed decline" of paper-based cheques.

According to payments association Apacs, around 1.6 billion cheque-based payments were made in the UK in 2007, a decline of 9.3% from 2006, whilst total value of cheque payments fell 1.3%. This is thought to be the fastest rate of decline recorded since cheque use began falling in 1991.