Friday, August 29, 2008

Remote Check Deposits


I have always found the US economy's dependency on checks fascinating. In a modern world with connectivity and all kinds of electronic payment options (even mobile payments quite prevalent), the biggest economy in the world's payment infrastructure is still paper based. This is quite ironic.

When I saw this article, I realised how difficult it is to change a massive payment eco-system. The check-based payment eco-system in the US must have many players all playing an important part. A lot off them would (of course) loose big time, if check systems are replaced by something much more modern, cheap, convenient and secure. If we picture a US where all check payments are replaced by electronic payments (mobile based and/or Internet-based) this would require many participants to change their behaviour (consumers, mercahnts, banks, payment switches) etc. This would of course have major ramifications on all of these participants. The sheer size of the change required makes this highly unlikely. It is true that in many countries checks have almost totally been replaced by modern, convenient electronic payment systems. In South Africa checks have just about disappeared in ten years since the deployment of Internet based payments (and also in the past five years with mobile payments). Today it is almost unthinkable to write checks for payments in South Africa.

Yet, if US consumers would embrace the shear convenience, security and ease of use of electronic payments, would the eco-system not change on the strength of consumer demand? How do we tell consumers in the US about a new, better way of paying?

1 comment:

Aditya said...

Hi, great blog. Very thoughtful, informational.

Assuming that checks were as big in SA, I'm interested if one can trace specific occurrences/events which caused the behavioral changes to ripple through the ecosystem. In the US for example, almost everyone pays their mortgage or utility companies using a check - even if they pay via the Internet, they use a check to do it. So one hypothesis would be that if the utilities and mortgage move to accepting mobile payments, there's a lever to use.