Strange 19th century banking
Posted Sep 16, 2005 23:48 UTC (Fri) by giraffedata
In reply to: Strange 19th century banking
Parent article: The Grumpy Editor's guide to personal finance managers (Part I)
The idea of handing someone a piece of paper, which they then hand to their bank, and their bank sends to my bank, seems extremely quaint.
Actually, there is normally at least one other stop between the banks, and often several.
But starting one year ago, the transfer is hardly ever paper. The paper check gets put into a computer and shredded as it enters the system, and makes the rest of the journey as an electronic record. But in some cases, it actually gets printed out and becomes paper again, because some smaller banks don't have the electronic check technology. The complexity of such a system (think about all the safeguards necessary to make sure a check doesn't accidentally become two checks as it changes form) made it take years for the US banking system to take even this step.
Just another example of an extremely poor quality business that people accept because it never occurred to them that they should not have to accept it. :(
I'm not sure who you think is accepting what poor quality. There are people who demand to be paid with a physical instrument and others who demand to pay with a physical instrument. Banks aren't forcing anyone to accept anything -- they all handle checkless transactions for people who want them. Virtually no businesses force customers to pay by check, because there are banking services that will convert a customer's electronic payment into a paper check where the business does demand one, and businesses that take a check but not plastic at point of sale are extremely rare.
I suspect countries which have managed to eliminate checks already have done it through the use of central management of the banking system, which is lacking in the US. And it's lacking not because the folks in charge of it are too stupid to see its advantages, but because deep cultural values in the US say government should be local -- the banking rules are made primarily by individual state governments, private banking associations, and invidivual banks.
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