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Issue 011101- Table of Contents Visa and MasterCard Take Their Lumps in Court Transforming Paper Checks into Electronic Transactions Financial Professionals Urge Treasury to Withdraw Check Conversion Plan Time Is Right for IrFM to Go Beyond Checkout Stand U.S. Wireless Names Heidi Goff as President/COO SSP Secures ATM and Debit Card Transactions Fast Pedaling for Payment Processing
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Lead Story: Checks ... Here Today, Here Tomorrow O
ver the last two decades, I have written hundreds of thousands of words about checks, their growth and their much anticipated movement away from paper. A quote from Alan Greenspan in April 2000 best describes the environment over this period.
"There were sweeping predictions in the late 1960s and early 1970s that electronic payments would quickly replace paper in the nation's commerce. ...Yet in retail payments, we have tended to underestimate the size of the hurdles confronting the shift away from paper."
While this still remains true, some believe that rapid acceleration to electronics is just around the corner. This is true for a number of reasons, the first of which is that check clearing through the Federal Reserve has just been reported to have declined for the first time since 1995, when a large amount of volume shifted to private clearing.
The Fed has reported that check clearing at the Fed declined a half percent from 1999 to 2000. Without analyzing if "private clearing" or even "on-us" items grew equal to or greater than this decline, something The Green Sheet will be analyzing in some depth, it is safe to say that it may well be true that check growth finally has reached a plateau.
This does not mean that consumers are losing their desire to continue to use paper even though developing systems may be converting their checks and handing them back to them, as Federal Reserve Vice Chairman Roger Ferguson noted in his Sept. 4, 2001 speech to a banking symposium in Philadelphia.
"The past few years have seen varied levels of development, both here and abroad, of new card-based and software-based payment instruments and systems, such as electronic money and Internet payment systems," Ferguson said, "yet cash and checks remain mainstays of retail commerce in the United States. This is a testament to the broad convenience of these instruments, developed over a long period, and the public's confidence in them."
However, we must realize there is still a lot of work to do, as two subsequent stories in this issue make clear.
For check conversion to have any prolonged success, many problems must be solved. On Page 9, CEO Gerard F. Milano of the Western Payments Alliance shows how hard his organization is working to provide solutions.
The second story, on Page 15, points out that, while the task of bringing the paper and ACH system into alignment is formidable, not all of the hurdles are in the banking system. Strong opposition exists to the idea of converting business checks to ACH items at the point-of-sale.
Major businesses' corporate cash managers cannot imagine one of their employees carrying business checks into another business for payment and being permitted to give consent to debit the corporation's account. They say that conversion of business checks will "seriously disrupt cash- management practices" in the U.S.
One thing for sure is true: A lot of work lies ahead for check electronification in the U.S.
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