The evolution of the check as a means of payment: a historical survey
Though checks' popularity is now waning in favor of electronic payments, checks were, for much of the twentieth century, the most widely used noncash payment method in the United States. How did such a relatively inefficient form of payment become so dominant? This article traces the historical evolution of the check, focusing on its relation to complementary and competing payment technologies. ; Originating in the eastern Mediterranean during the first millennium as a convenient form of payment between local merchants, checks became more versatile through the development of negotiability in sixteenth-century Europe. The suppression of banknotes in eighteenth-century England further promoted the use of checks. In the United States, nineteenth-century legislation discouraged other payment methods and eventually led to a nationwide check payment system. In the twentieth century, under the Federal Reserve's leadership, checks expanded rapidly and became the nation's default payment method. ; The authors discuss some persistent historical themes surrounding checks: checks' ease of use, which provides advantages over other payment methods but creates risk to businesses and banks; checks' sophistication, which evolved through centuries of legal precedent and operational experimentation; and checks' high costs relative to other forms of payment. ; Checks' traditional dominance of the U.S. payment system, the authors conclude, resulted from historical happenstances. These events gave the check relative advantages that are only now being overcome by electronic payment technologies.
Volume (Year): (2008)
Issue (Month): ()
|Contact details of provider:|| Postal: 1000 Peachtree St., N.E., Atlanta, Georgia 30309|
Web page: http://www.frbatlanta.org/
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bruce A. Champ & James B. Thomson, 2006. "National bank notes and silver certificates," Working Paper 0622, Federal Reserve Bank of Cleveland.
- Gorton, Gary, 1996. "Reputation Formation in Early Bank Note Markets," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 346-97, April.
- Bruce Champ & Neil Wallace & Warren Weber, 1993.
"Interest Rates Under the U.S. National Banking System,"
- Champ, Bruce & Wallace, Neil & Weber, Warren E., 1994. "Interest rates under the U.S. national banking system," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 343-358, December.
- Bruce A. Champ & Neil Wallace & Warren E. Weber, 1993. "Interest rates under the U.S. national banking system," Staff Report 161, Federal Reserve Bank of Minneapolis.
- Milton Friedman & Anna Jacobson Schwartz, 1970. "Monetary Statistics of the United States: Estimates, Sources, Methods," NBER Books, National Bureau of Economic Research, Inc, number frie70-1, September.
- Stephen F. Quinn & William Roberds, 2003. "Are on-line currencies virtual banknotes?," Economic Review, Federal Reserve Bank of Atlanta, issue Q2, pages 1-15.
- Tamaki,Norio, 1995. "Japanese Banking," Cambridge Books, Cambridge University Press, number 9780521496766, November.
- James J. McAndrews & William Roberds, 1997.
"A general equilibrium analysis of check float,"
FRB Atlanta Working Paper
97-4, Federal Reserve Bank of Atlanta.
- Arthur J. Rolnick & Bruce D. Smith & Warren E. Weber, 1998.
"Lessons from a laissez-faire payments system: the Suffolk Banking System (1825-58),"
Federal Reserve Bank of Minneapolis, issue Sum, pages 11-21.
- Arthur J. Rolnick & Bruce D. Smith & Warren E. Weber, 1998. "Lessons from a laissez-faire payments system: the Suffolk Banking System, 1825-58," Review, Federal Reserve Bank of St. Louis, issue May, pages 105-116.
- Geoffrey R. Gerdes & Jack K. Walton & May X. Liu & Darrel W. Parke, 2005. "Trends in the use of payment instruments in the United States," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Spr, pages 180-201.
- Garbade, Kenneth D. & Silber, William L., 1979. "The payment system and domestic exchange rates: Technological versus institutional change," Journal of Monetary Economics, Elsevier, vol. 5(1), pages 1-22, January.
- Ferderer, J. Peter, 2003. "Institutional Innovation and the Creation of Liquid Financial Markets: The Case of Bankers' Acceptances, 1914 1934," The Journal of Economic History, Cambridge University Press, vol. 63(03), pages 666-694, September.
- Temin, Peter & Voth, Hans-Joachim, 2006.
"Banking as an emerging technology: Hoare's Bank, 1702 1742,"
Financial History Review,
Cambridge University Press, vol. 13(02), pages 149-178, October.
- Peter Temin & Hans-Joachim Voth, 2003. "Banking as an Emerging Technology: Hoares Bank 1702-1742," Working Papers 93, Barcelona Graduate School of Economics.
- Peter Temin & Joachim Voth, 2006. "Banking as an emerging technology: Hoare's Bank, 1702-1742," Economics Working Papers 1263, Department of Economics and Business, Universitat Pompeu Fabra.
- Geoffrey R. Gerdes & Jack K. Walton, 2002. "The use of checks and other noncash payment instruments in the United States," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Aug, pages 360-374.
- Michael D. Bordo & Alan M. Taylor & Jeffrey G. Williamson, 2003. "Globalization in Historical Perspective," NBER Books, National Bureau of Economic Research, Inc, number bord03-1, September.
- Kahn, Charles M. & Roberds, William, 2007. "Transferability, finality, and debt settlement," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 955-978, May.
- Gary Richardson, 2006. "Bank Distress During the Great Contraction, 1929 to 1933, New Data from the Archives of the Board of Governors," NBER Working Papers 12590, National Bureau of Economic Research, Inc.
- Jeffrey M. Lacker & Jeffrey D. Walker & John A. Weinberg, 1999. "The Fed's entry into check clearing reconsidered," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 1-32.
- Ronald W. Michener & Robert E. Wright, 2005. "State "Currencies" and the Transition to the U.S. Dollar: Clarifying Some Confusions," American Economic Review, American Economic Association, vol. 95(3), pages 682-703, June.
- Jeffrey M. Lacker, 1997. "The check float puzzle," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 1-26.
- Garcia-Swartz Daniel D. & Hahn Robert W. & Layne-Farrar Anne, 2006. "The Move Toward a Cashless Society: A Closer Look at Payment Instrument Economics," Review of Network Economics, De Gruyter, vol. 5(2), pages 1-24, June.
- Elizabeth C. Klee, 2006. "Families' use of payment instruments during a decade of change in the U.S. payment system," Finance and Economics Discussion Series 2006-01, Board of Governors of the Federal Reserve System (U.S.).
- Bodenhorn, Howard, 1992. "Capital Mobility and Financial Integration in Antebellum America," The Journal of Economic History, Cambridge University Press, vol. 52(03), pages 585-610, September.
- Edward J. Green, 2003. "Economic perspective on the political history of the Second Bank of the United States," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 59-67.
- Calomiris, Charles W. & Mason, Joseph R., 2008.
"Resolving the puzzle of the underissuance of national bank notes,"
Explorations in Economic History,
Elsevier, vol. 45(4), pages 327-355, September.
- Charles W. Calomiris & Joseph R. Mason, 2004. "Resolving the Puzzle of the Underissuance of National Bank Notes," NBER Working Papers 10951, National Bureau of Economic Research, Inc.
- Charles W. Calomiris & Joseph R. Mason, 2005. "Resolving the puzzle of the underissuance of national bank notes," Working Papers 05-19, Federal Reserve Bank of Philadelphia.
- Farley Grubb, 2003. "Creating the U.S. Dollar Currency Union, 1748–1811: A Quest for Monetary Stability or a Usurpation of State Sovereignty for Personal Gain?," American Economic Review, American Economic Association, vol. 93(5), pages 1778-1798, December.
- Larry D. Neal & Marc D. Weidenmier, 2003. "Crises in the Global Economy from Tulips to Today," NBER Chapters, in: Globalization in Historical Perspective, pages 473-514 National Bureau of Economic Research, Inc.
- John H. Munro, 1998. "English 'Backwardness' and Financial Innovations in Commerce with the Low Countries, 14th to 16th centuries," Working Papers munro-98-06, University of Toronto, Department of Economics.
- James N. Duprey & Clarence W. Nelson, 1986. "A visible hand: the Fed's involvement in the check payments system," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 18-29.
- Quinn, Stephen, 1997. "Goldsmith-Banking: Mutual Acceptance and Interbanker Clearing in Restoration London," Explorations in Economic History, Elsevier, vol. 34(4), pages 411-432, October.
- Bauer, Paul W. & Hancock, Diana, 1993. "The efficiency of the Federal Reserve in providing check processing services," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 287-311, April.
- repec:cup:jechis:v:63:y:2005:i:03:p:666-694_54 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:fip:fedaer:y:2008:n:v.93no.4. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Meredith Rector)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.