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How can a paper check be the easiest and cheap option? Doing the same transfer of money via electronic means should be significantly cheaper to execute. And it

by pintxo 7y ago

How can a paper check be the easiest and cheap option? Doing the same transfer of money via electronic means should be significantly cheaper to execute. And it should be cheaper for all participants. No paper to print, transfer, read, process, send to the bank (physically!). Honest question, why do Banks in the US do not replace this process with something cheaper?

clintonb 7y ago
Paper checks are cheap for recipients, depending on volume, because the processing fees are really low. An individual simply needs to scan the check with their phone. Processing large volumes of checks (e.g. thousands per month) as a merchant can be outsourced to a lockbox facility if needed. Payers can write and mail a single check in a couple minutes or use a bill pay service that will do it all for you with a few clicks. Banks are trying to replace checks. Zelle, which sits atop ACH, is an effort to simplify P2P transfers. Real time payments (RTP) are on the way, and will have some invoicing functionality (e.g. line items). The challenge is to get enough banks, covering enough of the population, to make the system feasible. Zelle or RTP don't succeed if I have to fall back to using a check or cash because my friend's small bank/credit union does not support the service. Also, this all requires an investment of time and money to upgrade backend systems. That investment is easier for some institutions than others.
Spooky23 7y ago
Write a check, pop it in the mail. You’re done. Integrating with some ERP or payment system is a pain in the ass, especially for a one time or infrequent payment.
- pintxo 7y ago
  So in Germany you can, since the 80, probably also longer, fill out a small (standardized) form, bring it to your bank (possibly by mail) and they will transfer amount x from your account to the recipients. Since the 90, this can be done electronically, so you don’t need anything physical. This is now further harmonized by SEPA all across Europe. Where apparently something similar existed in most countries. I find it difficult to see the benefit of checks over the above process.
  - Spooky23 7y ago
    I totally agree, but we don’t have such a system in the US, and the alternatives being proposed today are all inferior. Checks are still easier.
    - pintxo 7y ago
      But why? What’s the reason this has been solved differently in the US and in the EU, when pretty much everyone agrees that the EU solution a) works and b) is probably cheaper? Or asked differently, why does something like the EU system not work in the US?

by pintxo 7y ago

clintonb 7y ago

Paper checks are cheap for recipients, depending on volume, because the processing fees are really low. An individual simply needs to scan the check with their phone. Processing large volumes of checks (e.g. thousands per month) as a merchant can be outsourced to a lockbox facility if needed. Payers can write and mail a single check in a couple minutes or use a bill pay service that will do it all for you with a few clicks. Banks are trying to replace checks. Zelle, which sits atop ACH, is an effort to simplify P2P transfers. Real time payments (RTP) are on the way, and will have some invoicing functionality (e.g. line items). The challenge is to get enough banks, covering enough of the population, to make the system feasible. Zelle or RTP don't succeed if I have to fall back to using a check or cash because my friend's small bank/credit union does not support the service. Also, this all requires an investment of time and money to upgrade backend systems. That investment is easier for some institutions than others.

Spooky23 7y ago

Write a check, pop it in the mail. You’re done. Integrating with some ERP or payment system is a pain in the ass, especially for a one time or infrequent payment.

pintxo 7y ago
So in Germany you can, since the 80, probably also longer, fill out a small (standardized) form, bring it to your bank (possibly by mail) and they will transfer amount x from your account to the recipients. Since the 90, this can be done electronically, so you don’t need anything physical. This is now further harmonized by SEPA all across Europe. Where apparently something similar existed in most countries. I find it difficult to see the benefit of checks over the above process.
- Spooky23 7y ago
  I totally agree, but we don’t have such a system in the US, and the alternatives being proposed today are all inferior. Checks are still easier.
  - pintxo 7y ago
    But why? What’s the reason this has been solved differently in the US and in the EU, when pretty much everyone agrees that the EU solution a) works and b) is probably cheaper? Or asked differently, why does something like the EU system not work in the US?