A comparison of social costs and benefits of paper check presentment and ECP with truncation
Each year, about 60 billion checks are collected in the United States. While the shares of electronic payments methods such as the automated clearing house and credit and debit cards have been growing in recent years, the volume of checks has grown by more in absolute numbers during the last 20 years than all electronic payments methods combined. Partly because of their convenience, checks remain an extremely popular way to carry out transactions. Since it seems that checks will be around for the foreseeable future, it makes sense to try to improve the process of their collection.> This article compares the social costs and benefits of electronic check presentment with truncation to those of paper check processing. Even though ECP with check truncation was found to raise the net social benefits by 2.39 cents per check, or around $1.4 billion per year, several obstacles may prevent the private market from reaching universal truncation in the near future. The obstacles include transition costs, network externalities, uneven distribution of savings, an interim period of dual check processing (paper and electronic), and uncertainty surrounding check or image retrieval by paying banks. Despite these obstacles, there are reasons that it might be socially desirable to encourage ECP (through pricing policies, for example). However, the results presented here are too preliminary to specify any exact policy recommendations.
Volume (Year): (1997)
Issue (Month): Jul ()
|Contact details of provider:|| Postal: 600 Atlantic Avenue, Boston, Massachusetts 02210|
Web page: http://www.bos.frb.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.:
- Nicholas Economides, 1997.
"The Economics of Networks,"
Brazilian Electronic Journal of Economics,
Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December.
- Paul W. Bauer & Diana Hancock, 1995. "Scale economies and technological change in Federal Reserve ACH payment processing," Economic Review, Federal Reserve Bank of Cleveland, issue Q III, pages 14-29.
- Kirstin E. Wells, 1996. "Are checks overused?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 2-12.
When requesting a correction, please mention this item's handle: RePEc:fip:fedbne:y:1997:i:jul:p:27-44. 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: (Catherine Spozio)
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.