Electronic Banking: The Post-Check 21 Payments System (CRS Report for Congress)
| Release Date |
Nov. 1, 2006 |
| Report Number |
RS22525 |
| Report Type |
Report |
| Authors |
Walter W. Eubanks, Government and Finance Division |
| Source Agency |
Congressional Research Service |
Summary:
The Check Clearing for the 21st Century Act (Check 21) was enacted in 2003 to encourage replacing paper check clearing with electronic check clearing because of the cost savings and efficiencies electronic clearing offers. Coincidentally, in the 2001-2003 period, consumers' increased use of electronic payment methodsâsuch as credit, debit cards, and automated clearinghouse (ACH) paymentsâexceeded the number of paper check payments for the first time in U.S. history. Consumers' growing use of cards and other fully electronic payment methods appears to be diminishing growth of Check 21 use and is leapfrogging the systems past the paper/electronic way station Check 21 was to provide.
This report is a brief assessment of the role of Check 21 in a payments system that is increasingly dominated by electronic payments. This assessment indicates that if banks continue to adopt Check 21, the payments system will capture significant cost savings and efficiencies in the near future, despite the declining use of paper checks. Paper checks remain the most popular single noncash payment method, and the largest noncash payment type in terms of value. Most large payments are still being made with paper checks. Some banks may never adopt Check 21, preferring to forgo its implementation in favor of waiting for fully electronic processes that may be more rapidly approaching than earlier expected.
