Department of Electrical Engineering and Computer Science Massachusetts Institute of Technology

Cambridge, MA 02139

Contemporary Bank Check Alternatives

An AUP Final Report submitted by:

Adam T Garner6.199 Advanced Undergraduate Project Final Report May 16, 2003

AUP Supervisor: Professor Amar Gupta

0. AbstractTraditional bank checks are slow, cumbersome, and expensive for all parties involved. In

response, electronic alternatives have gradually emerged, that as a whole, have the capability of completely replacing bank checks. These alternatives have been met with varying levels of success. However, in the long run, bank checks will be phased out by newer, better, and cheaper ways of doing business.

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Table of Contents

0. Abstract.................................................................................................................................................2

1. Introduction..........................................................................................................................................5

2. Funds Transfer Systems.......................................................................................................................62.1 ACH............................................................................................................................................62.2 Card-Based Transactions.............................................................................................................7

3. Consumer-to-Consumer: Paypal.........................................................................................................93.1 How It Works..............................................................................................................................93.2 Underlying Processes................................................................................................................113.3 Advantages and Disadvantages.................................................................................................123.4 Commercial Success Thus Far/Future Prospects......................................................................133.5 Similar Products........................................................................................................................13

4. Consumer-to-Business (Recurring): Checkfree.................................................................................144.1 How It Works............................................................................................................................144.2 Underlying Technology.............................................................................................................154.3 Advantages and Disadvantages.................................................................................................154.4 Commercial Success Thus Far/Future Prospects......................................................................154.5 Similar Products........................................................................................................................16

5. Consumer-to-Business (one-time): Debit Card..................................................................................175.1 How It Works............................................................................................................................175.2 Underlying Technology.............................................................................................................175.3 Advantages and Disadvantages.................................................................................................175.4 Commercial Success Thus Far/Future Prospects......................................................................185.5 Similar Products........................................................................................................................18

6. Business-to-Consumer: Direct Deposit..............................................................................................196.1 How It Works............................................................................................................................196.2 Underlying Technology.............................................................................................................196.3 Advantages and Disadvantages.................................................................................................206.4 Commercial Success Thus Far/Future Prospects......................................................................206.5 Similar Products........................................................................................................................20

7. Features Taxonomy............................................................................................................................21

8. Foreign Systems.................................................................................................................................228.1 European GIRO.........................................................................................................................228.2 Bank Checks..............................................................................................................................24

9. Conclusion..........................................................................................................................................26

10. References........................................................................................................................................29

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Table of Figures

Figure 1. Financial Transaction Counterparty Breakdown and Designation.................................5

Figure 2. ACH Participants [2].......................................................................................................7

Figure 3. On-line Transaction Flowchart........................................................................................8

Figure 4. Offline Transaction Flowchart........................................................................................8

Figure 5. Paypal Account Establishment and Payment Flow [10]...............................................10

Figure 6. Pricing for Paypal transfers [4].....................................................................................11

Figure 7. Direct Deposit payment flow [9]...................................................................................20

Figure 8. Volume of Funds Transfer Payments [22]....................................................................23

Figure 9. Per Capita Cheque Payments for Various Countries [22].............................................26

Figure 10. Transaction Times for Alternatives vs Standard Bank Checks...................................27

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1. IntroductionTraditional bank checks are an integral part of the modern economy. They are one of the

primary mediums by which individuals and organizations transfer money and pay bills. However, bank checks are extremely expensive and time consuming to deal with – both from a behind the scenes processing standpoint as well as a top-level user standpoint. From a processing standpoint, it has been estimated that each check costs society between one and five dollars to administer [25]. End-user costs vary but are significant as well. With roughly fifty billion checks written every year, this amounts to a great deal of money [25]. Efforts to ameliorate the situation have gone in a number of different directions and have focused on different aspects of the problem.

Some, public and private, have attempted to streamline the underlying process. Professors Amar Gupta and Rafael Palacios of the PROFIT Initiative at the Sloan School attempted to do so when they designed the iCheck system. This system utilized the internet as well as custom optical character recognition (OCR) and neural network technology to cut time and costs from the bank check processing procedure [1]. By transmitting digital images of checks rather than the physical checks themselves, the system is potentially able to eliminate the biggest expense associated with check processing: the cost related to physical transport of the physical check during the clearing process [5].

Other efforts, mostly private, have sought to offer commercial alternatives to bank checks. These focus on user costs and convenience but simultaneously reduce or eliminate processing costs to society as well. To this point, there has not emerged a single silver bullet alternative to bank checks in the U.S. However, as a collection, they fulfill many of the roles of traditional bank checks and can be categorized according to their focus, as follows:

Consumer-to-Consumer Consumer-to-Business (recurring) Consumer-to-Business (one-time) Business-to-Consumer Business-to-Business

The following sections will discuss the first four of these applications. Business-to-Business alternatives are a topic unto themselves. These encompass Financial Relationship Management (FRM), professional invoicing, and a host of other interconnected tools that are beyond the scope of this paper.

Figure 1. Financial Transaction Counterparty Breakdown and Designation

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2. Funds Transfer SystemsBefore alternatives for bank check are discussed, the commonly used systems by which funds

are transferred will be introduced. These systems are part of the pre-existing financial infrastructure and form the underlying basis of every bank check alternative that will be discussed in this paper.

2.1 ACHFounded in 1972 by the Special Committee on Paper Entries (SCOPE), ACH is “a processing

and delivery system that provides for the distribution and settlement of electronic credit and debits among financial institutions. The ACH Network was developed in response to the astronomical growth of check payments and the many technological advances in the mid-twentieth century and functions as an efficient, electronic alternative to paper checks. Through a nationwide telecommunications network, each ACH Operator is able to communicate with other ACH Operators to exchange entries quickly and efficiently, regardless of geographic distances involved. The ACH Network offers an assortment of technical formats that can be used for a variety of payment applications, products and services. The ACH Network is governed by operating rules and guidelines, which are developed by the actual users of the system, and is administered through a series of agreements among financial institutions, customers, trading partners, and ACH operators.” [2]

In 1980, the Monetary Control Act was enacted stating that the Federal Reserve must charge enough to cover its costs as an ACH Operator. Previously, it had offered its services free of charge. Therefore, the amount that private companies are charged for ACH Network transfers can be used as an accurate gauge of the actual cost of such transfers. This amount can be used as a comparison to the amount that it typically costs for bank check processing.

Every ACH transaction has five participants:

Originator: The entity initiating the transaction. This can include individuals and any type of organization (company, government, etc.).Originating Depository Financial Institution (ODFI): The financial institution representing the originator. This institution receives payment instructions from the originator and passes these on to the ACH Operator.Automated Clearing House Operator: Central clearing facility operated by either the Federal Reserve Bank (FRB) or a private organization. Receiving Depository Financial Institution (RDFI): The financial institution representing the receiver. This institution receives ACH entries from the ACH Operator and then adjusts the receiver’s accounts accordingly.Receiver: The entity represented by the RDFI. This can include individuals and any type of organization (company, government, etc.).

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Figure 2. ACH Participants [2]

Originators initiate transactions with receivers through their ODFI’s. There are two types of transactions: credit and debit. A credit transaction is one in which the originator sends a payments. A debit is a transaction in which the originator requests a payment. Generally debits are pre-authorized transactions, such as payments to an individual’s mortgage company or cable company.

Processing of ACH transactions employs a “batch processing, store-and-forward system.” [2] Thus, transaction time is not instantaneous and may take several days – typically three or four.

2.2 Card-Based TransactionsThe information provided in this section is based on a phone interview with Bob Miszkiewicz,

a Senior Sales Executive at First Data, a leading data processing firm. Card-based transactions are the transactions underlying credit card, debit card, and ATM

payments. There are two primary, interconnected systems by which these transactions are processed. The first is the network used for processing ATM transactions. The second is the network used for processing credit card transactions.

Debit cards employ both systems, depending on the type of transaction that is occurring. Typically, the customer is given the choice of which type of transaction in which to engage at the point-of-sale (POS). On-line debit card transactions are those that employ the ATM network to directly debit money out of the customer’s bank account. A pin number is entered at the processing terminal of the retailer in order to complete the transaction. The term, “on-line”, is used to signify the active, real-time nature of the transaction. Off-line debit card transactions are those that employ the credit card network to debit money out of the customer’s account. A customer signature is required to complete the transaction. The processing time is far longer with off-line transactions, taking approximately four days as opposed to the single day required for on-line transactions.

A description of the underlying processes is presented in the following paragraphs. First, the on-line process will be described followed by a description of the off-line process. Cumulatively, Miszkiewicz reported the average on-line transaction to cost a net amount of 20 cents while off-line transactions cost a uniform 1.70% of the transaction size.

On-line Processing1) Customer Accesses Terminal: First, the customer accesses the nationwide card processing network through a terminal at the POS. Such a terminal is operated by a terminal processor, such as BUIPASS,

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and costs the retailer a base amount of approximately $175 a month to use. The customer swipes his/her debit card through the terminal which reads the information off of the magnetic strip on the back of the card. The retailer is also charged for each transaction. Three cents must be paid to BUIPASS and the retailer is charged an additional 20 cents which is paid to the customer’s bank.2) Terminal Processor Routes Transaction: The first six digits of the card are known as the bank ID number (BIN). The terminal processor looks this number up in a BIN table in order to determine the customer’s bank. Each bank in the table has a contract with a specific electronic payment company, such as NYCE, to which transactions are routed. For a flat fee of approximately $1000 a month, each terminal processor is allowed access to each of the electronic payment company’s systems.3) Electronic Payment Company Obtains Authorization: In this step, the electronic payment company acts as a traffic cop. It relays the transaction information to the customer bank. An example of an electronic payment company is the NYCE Corporation. For its services, the electronic payment company receives 4 cents from the retailer and 4 cents from the customer’s bank.4) Customer Bank Authorizes Payment: The customer bank checks the customer’s account to ensure that there are sufficient funds in the account to cover the transaction. If this is indeed the case, the customer bank relays the authorization to the electronic payment company. Actual processing occurs as a batch job on a daily settlement basis in a type of ACH transaction known as a Fed Funds Wire.

Figure 3. On-line Transaction Flowchart

Off-line Processing1) Customer Accesses Terminal: Once again, the customer accesses the nationwide card processing network through a terminal at the retail location. Fees and processes are identical except that instead of being charged 20 cents for the transaction, the retailer is charged 1.7% of the transaction size by the customer’s bank.2) Terminal Processor Routes Transaction: The terminal processor routes the transaction to the appropriate destination – in this case, the customer’s credit card company. There are two primary credit card companies that issue debit cards: MasterCard and Visa. The two companies process transactions in an identical fashion and receive a fraction of the 1.7% service fee that is paid to the customer’s bank.3) Credit Card Company Processes Transaction: The credit card company processes these transactions like any other transaction. This typically takes several days. However, at the end of this process, instead of the charge being added to the short-term debt of the customer, the payment amount is immediately billed to the customer’s bank account.4) Customer Bank Executes Transaction: After receiving the transaction, the customer’s bank transfers the money to the bank account of the retailer. This occurs even if the customer does not have sufficient funds in his/her account. In this case, the customer is charged an overdraft fee and a line of credit is extended.

Figure 4. Offline Transaction Flowchart

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3. Consumer-to-Consumer: PaypalConsumer-to-consumer (C2C) transfers, as the name implies, involve one individual

transferring money to another individual. Specific examples might include:

A son/daughter paying off college loans to his/her parents Roommates reimbursing one another for joint costs General repayment of money owed to a friend

There are several systems that currently fulfill this need. They all rely on internet and e-mail. Currently, Paypal (www.paypal.com) is the most successful. It began as a service that was primarily used to pay for items purchased at online auction sites such as EBay. By allowing bidders to instantly and securely transfer money to sellers, it proved to be invaluable for these types of purchases. The only parallel alternative with similar convenience and security was and is the credit card; however, receiving payments in this manner is not an option for most individuals and small businesses.

From its simple roots, Paypal has expanded dramatically and currently offers many of the services of a traditional bank. Additionally, its systems are active in 38 countries, thereby allowing C2C commerce to be truly international.

3.1 How It WorksGetting Started

Prospective Paypal users begin by opening an account on the Paypal website (www.paypal.com). Three different types of accounts (personal, premier, business) can be opened, each possessing a different set of features as discussed below [4]. The only requirements to open an account are access to the internet and an e-mail address. The account registration process is simple, involving a one page form that needs to be filled out.

Personal AccountThe most basic type of account is the personal account and is targeted primarily at home users

who occasionally use it for commercial purposes. These purposes might include online auction listings and small-scale internet sales. The features offered by this type of account include:

Traditional Bank Services: Paypal accounts can be treated like traditional bank accounts. Money can be transferred to and from Paypal accounts using electronic fund transfers employing the ACH Network. This money is stored in the account in the form of a balance and can earn a money market rate of interest. In order to do so, the account must be enrolled in the Money Market Fund and funds must be stored in U.S. currency [4]. If money is not enrolled in the Money Market Fund, no interest is accrued. This is due to the fact that Paypal does not possess the legal right to act as a bank and thus has no claim and cannot use the customers’ money in a manner that a traditional bank can.

Send Money: To send a payment, the e-mail address of the recipient, payment amount, and funding source are entered via the Paypal website. Funding sources can include standard checking accounts at brick-and-mortar banks, credit cards and Paypal balances. Payments can also undergo currency exchange during transmission, a feature recently added through a partnership with Wells Fargo.

When the funding source is a brick-and-mortar bank account, the user can either attempt to instantly transfer the money or to send the money via an eCheck – a route which will take roughly three to four days to process. In some cases, Paypal will deny a user the right to instantly transfer a

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specific payment and will refer him/her to use an eCheck instead. This will be explained in section 3.2.

For instant transfers, both the sender and receiver are notified by e-mail when the processing is complete. For eCheck’s, the sender and receiver are notified when the transaction order is placed and again when the eCheck has cleared.

Receive Money: The process of receiving payments is automatic. The receiver is blind to the payment method. Personal account users can only accept a limited number of payments per month and cannot accept credit card payments. This is due to the fact that although such transactions cost money to Paypal, they still offer this service free to personal account users.

Note: These transactions can only occur with other Paypal users. Paypal allows payment to be sent to or requested from non-users but those non-users are then prompted to establish Paypal accounts in order to complete the transaction. Thus, customers beget new customers – a process which has been compared to viral growth [10]. This has proven to be a highly successful method of expanding Paypal’s user base.

Figure 5. Paypal Account Establishment and Payment Flow [10]

Request Money: To request money, one enters in the counterparty’s e-mail address, the requested amount, and an explanation. The counterparty is then sent an e-mail with the information and provided a link to fulfill the request. This function can be thought of an informal, personal invoice.

Auction Tools: Paypal offers online auction tools free to customers. These tools expedite the process that auction bidders must go through in order to pay for items (using Paypal) that they have purchased.

Mobile Phone Payments: Paypal customers can log into their Paypal accounts using mobile phones in order to send money, check balances and view transactions. The phone used in such a process must be web enabled. The customer simply accesses the Paypal website, enters their username and password, registers a pin number, and then is given access to their account.

Premium FeaturesPremium features exist beyond core features. The following features are offered for premier

and business accounts:

Accept unlimited credit card payments: Subscribers to the premium feature set are allowed to accept an unlimited number of payments, including payments by credit card. On the downside however, users

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must pay a fee for these payments. The fee remains the same regardless of the funding source employed by the sender. Pricing for these transfers is as shown below.

Figure 6. Pricing for Paypal transfers [4]

Mass Payments: This feature facilitates the payment of large numbers of bills. The sender uploads a tab-delimited text file containing receivers’ e-mail addresses and corresponding payment amounts. The sender is allowed to create a customized e-mail to accompany the payments, which are then sent [4].

Subscriptions and Recurring Payments: This feature is similar to Mass Payments except from the other end. This feature allows Paypal users to automatically and periodically invoice their customers for payments.

ATM/Debit Card: This is potentially one of the most effective features that Paypal offers. Through a partnership with Providian bank, Paypal users can apply for a physical ATM/Debit Card that directly accesses funds stored in the user’s Paypal account. The debit card is of the MasterCard variety and employs the MasterCard computer systems. With this feature, Paypal extends its reach to the brick-and-mortar world and offers features that have traditionally been in the exclusive domain of credit unions and banks. Additionally, since the card withdraws money directly from a user’s Paypal account, there is no paperwork or check writing required on the part of the user.

Multiple Logins: This feature is targeted primarily at business users. Different logins can be set to have different levels of access to the Paypal account.

3.2 Underlying ProcessesAccording to Paypal employee Premal Shah, there are four primary methods by which Paypal

transfers money between customers [3]:

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Internal: The simplest transfers are those for which the sender has a pre-existing balance that covers the size of the transaction. In this case, the transfer is simply an internal Paypal matter. The amount is debited from the sender and credited to the receiver. The cost for such a transaction is negligible.

Credit Card: In this case, the credit card of the sender is charged the amount of the transaction. Paypal credits this money to the receiver. As stated earlier, the charge to Paypal for such a transaction is roughly 2% on the notional amount.

ACH (delayed): This is an ACH Network transaction in which Paypal transfers money from the sender’s bank account. Paypal refers to this type of transaction as an eCheck. The delay is caused by the processing lag in the ACH Network. Paypal cannot transfer the money immediately since it must wait for confirmation that there exists enough money in the sender’s account to complete the transaction. The delay time can be as high four days further. If the sender’s bank initially rejects the withdrawal, then an additional seven days of processing time is added [4].

ACH (instant): This is similar to a delayed ACH transaction except that Paypal transfers the money immediately. By doing so, Paypal assumes the risk that the sender does not have enough money in the account and that Paypal is unable to recover the shortfall from the sender. Paypal employs a proprietary algorithm employing a number of factors such as sender credit history and transaction amount to determine whether to go through with the instant transaction or not. As specified previously, if Paypal denies the request, then an eCheck transaction is recommended instead.

3.3 Advantages and DisadvantagesClearly, Paypal possesses numerous advantages over traditional bank checks. It has the

capability of being nearly instantaneous, is entirely electronic, and eliminates significant processing costs to society. Furthermore, especially for small business, Paypal possess the potential to become an invaluable tool. Many do not possess a cost-effective method of accepting online payments. Paypal allows them to accept these types of payments without the high monthly cost of POS credit card terminals.

The biggest disadvantage to such a system, however, is that transactions can only occur between holders of Paypal accounts. Because of this, even those who choose to use the system may be limited by potential counterparties. On the positive side, Paypal is currently the most dominant internet based C2C service; this means that customers who do use such services are likely to use Paypal, increasing the latter’s effectiveness. Because the pre-existing customer base is a major draw for new users, Paypal is unlikely to be faced with significant competition, thereby potentially removing the incentive for further innovation. This early adapter problem can be seen in the instant messenger space where AOL instant messenger dominates because among other reasons, it was the first instant messenger available and the biggest, which can stifle competition.

Another potential disadvantage is that payments are primarily e-mail based. This format is ideally suited for internet auction transactions. However, it does not work well for other forms of C2C commerce, many of which involve some sort of face to face interaction. For these, cash and bank checks are clearly better suited as both goods or services can be exchanged in person for money. A possible solution is Paypal’s use of mobile phones as a means of instantly transferring money, and almost as importantly, checking on the status of an account or specific transactions. In this scenario, money might be transferred by phone by the sender and the receiver could then immediately verify the transaction. It is yet to be seen whether this slightly cumbersome, yet, effective method of transfer will be embraced.

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3.4 Commercial Success Thus Far/Future ProspectsPaypal has proven to be a stunning commercial success. With 6.5 million customers, including

1 million businesses, added since its inception in December of 1999, Paypal is the fastest growing financial services firm in history. Another telling statistic is that in any given 30 day period, over 50% of Paypal users log in to their accounts [10]. This indicates an active (and profit generating) customer base. Paypal’s success combined with its solid business model have earned it the backing of several major institutions including Goldman Sachs and JP Morgan on the financial side and Qualcomm and Nokia Ventures on the mobile communications side.

Paypal’s aspirations do not end with its bread and butter, $100 billion C2C market [10]. It is currently doing extremely well in the C2B market, a $4.2 trillion market [10], with small business owners and is looking to expand to the Business-to-Consumer (B2C) and Business-to-Business (B2B) markets as well. Its Mass Payments and Recurring Payments features discussed in section 3.2 should prove invaluable. Paypal’s exemplary track record, significant and growing user base, and strong backing make it a sure bet to thrive in the future.

3.5 Similar ProductsThere are several systems on the market which operate in a similar manner to Paypal. These

include, Yahoo!’s Paydirect, XCompte, BidPay by Western Union, and Billpoint. The last of these is a subsidiary of EBay, but is now being phased out with EBay’s recent acquisition of Paypal.

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4. Consumer-to-Business (Recurring): CheckfreeConsumer-to-Business (recurring) transactions consist of payments that individuals make to

commercial establishments on a regular basis. Specific examples might include:

Paying phone bills Paying electric bills Making mortgage payments

When paid for using banks checks, each of these payments requires a separate check mailed to the commercial establishment. Each payment must be sorted and processed. Large companies, such as utilities and phone companies can literally receive millions of checks every month. Thus, elimination of paper-based payment through the use of electronic alternatives has the capability to dramatically reduce costs. There are a number of such systems available. Typically, customers access and pay their bills over the internet through online login. CheckFree (www.checkfree.com) is the current leader in this market.

4.1 How It WorksCheckFree, established in 1981, offers two distinct services for Consumer-to-Business

transactions.

CheckFree e-Bill ServiceThe first, known as The CheckFree e-Bill Service, allows payments to be made to any one of

260 subscriber companies comprised of utilities, financial service organizations, and insurance and telecommunications companies. Each of these companies is a client of CheckFree and pays CheckFree a fee. In exchange, their customers are able to receive and pay their bills online. This in turn reduces costs for the billing companies. Customers must first establish an account with CheckFree at the CheckFree website. The account establishment process is fairly straightforward. The first step is to complete the website registration form. This requires that the user’s name, address, and e-mail address be entered. Next, a menu containing the list of billing companies is displayed and customers are asked to choose their billers from among the list. In the final step, account information with regard to each billing company is obtained. At this point, the user also establishes a login with a user ID and password.

With an established account, customers are given access to personalized web sites at www.MyCheckFree.com. From this site, customers are able to view, pay and track bills. E-mails are sent on a monthly basis to remind customers of upcoming bills that require payment. Bills can be scheduled to be paid in advance and can be scheduled up to two days prior to their payment deadline due to a two day transaction time. Customers can either choose to pay using a check or money market account, or by credit card where accepted by the biller. Prior bills are stored for up to six months on the CheckFree servers for customers to access.

This service is offered free to consumers. Receiving companies pick up the tab with the cost being more than offset by the savings garnered by them from not having to process bank checks.

Online Payment ServiceThe Online Payment Service is an expanded version of the CheckFree e-Bill Service. Rather

than limiting potential payments to the 260 subscribing companies, payments can be made to anybody, anywhere. As an example, one might use the Online Payment Service to send money to children in colleges or to neighbors. However, the Online Payment Service is not offered directly through the

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CheckFree Corporation itself. Instead, the service is offered through any one of 657+ service providers, whose ranks include Bank of America, Yahoo and the U.S. Postal Service [17].

The account establishment processes with the service providers are similar. The customer must enter his/her personal information. Following that, the customer must set up a list of payees as well as a payment schedule. However, for payees who are not subscribers to the CheckFree service, electronic payments are not possible. Instead, a paper check is printed and physically mailed to the intended recipient using the information and payment amount submitted to service provider.

This service, on the other hand, costs customers anywhere from 0 to 15 dollars a month for a set number of transactions. Additional transactions cost more. The justification for these costs can be found in the fact that to the businesses that are not subscribers to CheckFree, paper checks would need to be sent anyway. The customer would therefore be required to pay for envelopes as well as stamps.

4.2 Underlying TechnologyPayments to subscribers are made through ACH transactions and credit card transactions.

These are detailed in section 2. Additionally, as mentioned, payments to non-subscribing companies are made through mailed paper bank checks.

4.3 Advantages and DisadvantagesThe cost is the driving force behind C2B online payment technology. It has been estimated that

the cost to the private sector of processing such payments through the use of bank checks is roughly $1.25. At the same time, electronic alternatives have been estimated to save companies roughly 50% of this cost [8]. Thus, on a cost-per-transaction basis, electronic payments are clearly preferable.

However, while the cost-per-transaction diminishes, there is a significant upfront cost for bill payees. “It is estimated that a biller has to incur an upfront fixed cost ranging between $150,000 and $1 million to develop [electronic bill payment and presentment] capabilities; the average cost is approximately $400,000 (McVey and Brown 2000a). Because the ensuing benefits per bill are relatively low, a biller needs to issue a significant number of bills to recover its fixed investment.” [8]

This highlights the chicken-and-egg problem that exists in the C2B market. Bill payees are reluctant to cover the upfront costs unless there is a guarantee that the initial investment will be recovered through per transaction savings. This keeps bill payees from adopting the technology. On the other hand, customers are also unwilling to spend the upfront time commitment required to research and establish a C2B account before there is a guarantee that the initial investment of time will be recovered through future savings of time and money.

The paper check printing and mailing approach that CheckFree offers is a potential successful, yet backward, solution to this problem. By offering such a service, more customers are likely to join thus enticing more bill payees to join as well. Although this might be beneficial in the long term, in the short term it goes against everything that the C2B market stands for and is extremely expensive for all parties involved.

4.4 Commercial Success Thus Far/Future ProspectsDespite the apparent advantages offered by such services, they have had little commercial

success thus far. In 2001, it is estimated that less than 1% of such bills (albeit with both businesses and consumer as the payer) were presented and paid online [8].

At the same time, CheckFree, the leading player in the industry, has managed to survive through the recent tech bust with increasing revenues each quarter and decreasing losses; it is now close to the break-even point. It possesses a respectable valuation of $2.5 billion and its shares are

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trading at $28 per share. The market clearly has faith in the company and judging by its improving performance, it is on the right path.

A valid comparison might be to that of the general electronic transaction market. “Even in 2000, only 37 percent of noncash retail payments were completed electronically; the remaining 63 percent were made by check. Since the share of electronic payments was 14 percent in 1979, it took electronic instruments twenty years to gain 23 percent of the market.” [8]

With that in mind, CheckFree’s, and by extension the C2B market’s, performance is nothing to worry too seriously about. The required infrastructure will take time to build but in the end, the potential efficiencies will ensure more widespread adoption.

4.5 Similar ProductsThe C2B technology has failed to attract the necessary customer base and thus has not fared

well in recent years. The major, direct competitor to CheckFree was www.TransPoint.com, but it has since gone out of business. That leaves Paypal which is beginning to roll out services that conceivably could put it in competition with CheckFree.

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5. Consumer-to-Business (one-time): Debit CardConsumer-to-Business (one-time) transactions consist primarily of one-time payments for

goods and services. Examples might include:

Paying for groceries Purchasing Christmas presents

In the past, bank checks and later credit cards were the only options for such transactions. In 1989, debit cards first became available with the introduction of the VISA debit card [12]. Debit cards are similar to bank checks in that money is withdrawn directly from the user’s bank account. However, convenience, transaction time, and transaction cost have greatly improved.

5.1 How It WorksDebit cards are issued by private banks to customers. The conditions and methods by which

they are issued vary from bank to bank. However, all debit card holders must have a bank account established with their card issuer. When a customer initiates a transaction, money is debited directly out of his/her account and transferred to the counterparty of the transaction. Unlike credit cards, there is no check to send in at the end of the month and nothing for the customers to sign off on. Instead, the process is automatic. Customers can choose to have monthly statements mailed to their houses for record keeping purposes. Some of the larger banks allow customers to access account information over the internet as well.

Two types of transactions are possible with debit cards. On-line transactions require the user to enter a pin number at the POS and off-line transactions require the user to sign for the transaction. These are commonly known as debit and credit transactions, respectively. Some smaller banks currently charge customers a flat fee per on-line transaction. This is to encourage customers to instead make use of off-line transactions since banks receive a far larger commission for these types of transactions.

5.2 Underlying TechnologyThe technology underlying such transactions was described in detail in section 2.2.

5.3 Advantages and DisadvantagesBecause debit cards have been designed to replace both credit cards and bank checks, their

advantages and disadvantages will be discussed in comparison to both alternatives.

Bank ChecksObviously, from a societal standpoint, debit cards are preferable to standard bank checks. The

incredibly costly bank check processing is eliminated. In this process, bank checks are physically shipped from location to location and the contents of the checks are read by hand. Debit card transactions replace this with a completely electronic form of processing.

From the consumer standpoint, the net result from a debit card transaction is the same as that of a bank check transaction. Money is automatically debited out of the consumer’s bank account and the transaction counterparty is automatically paid. However, debit cards are far more convenient in that the book keeping is automatically handled by the consumer’s bank. There is no checkbook to balance and no individual checks of which to keep track. Receipts are stored in either case.

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Credit CardsOne of the primary advantages of debit cards over credit cards is the ease of use. Consumers

are not required to repay their card debt by mail in check on a monthly basis as they are with credit cards – the money is automatically deducted from their accounts. Additionally, obtaining a debit card is far easier than obtaining a credit card. In fact, many banks do not even perform a credit check on customers before issuing debit cards. Because the money is deducted directly from the customer’s bank account, there is a limited amount by which customer’s can overspend.

On the downside, customers are in fact able to spend money that is not in their bank account. On-line transactions do not allow this since they involve a real-time connection to the customer’s bank’s computer systems. However, off-line transactions have no such connection and thus customers are able to spend money with debit cards that is not actually in their account. This is particularly dangerous with debit cards since customers think of them as drawing money directly from their accounts. When this occurs, it is known as an overdraft and the bank pays the customer’s counterparty but charges the customer a thirty dollar fee per overdraft transaction [12].

Another potential downside is debit card’s protection in case of fraud. Federal regulations specify that maximum fraud liability on credit cards is fifty dollars, but it is five hundred dollars with debit cards [12].

5.4 Commercial Success Thus Far/Future ProspectsDebit cards were originally created as a method by which banks could avoid bank check

processing costs [13]. Since then, their use has exploded to the point where in 2001, consumers made over 10 billion debit card transactions amounting to over 400 billion dollars. In fact, in the first quarter of 2001, a greater percentage of purchases were made using debit cards than credit cards, 26 percent versus 21 percent [14].

However, all is not rosy in the world of debit cards. There is currently a battle occurring between retailers on one side and Visa and MasterCard, the card associations that issue debit cards, on the other. Due to the greater fees earned through off-line transactions, fees have been levied on consumers by issuing banks for on-line card transactions to discourage their use. In turn, retailers have taken steps to encourage consumers to use debit cards for on-line transactions rather than off-line transactions. This has resulted in a lawsuit by retailers that MasterCard has since settled but that is still pending for Visa. Some are worried that the fees and controversy will eventually drive consumers away from debit cards altogether and back to the costly arena of paper bank checks [13].

5.5 Similar ProductsCredit cards are the commercial product most similar to debit cards. Both user interaction and

underlying transaction processing is nearly identical. However, with credit cards, a running debt is established with the credit card company. The customer is given the choice of either paying the debt off on a monthly basis with no penalty, or delaying payment of the debt at high monthly rates.

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6. Business-to-Consumer: Direct DepositBusiness-to-Consumer payments consist of payments made by businesses, usually employers,

to individuals. These might include payments for:

salary annuities bonuses and commissions dividends and interest payments pensions travel expense reimbursements

A system to facilitate these types of transfers, made electronically, has existed for nearly twenty-five years in the form of Direct Deposit. In the past, such payments were made using bank checks distributed in paper form. However, Direct Deposit makes the process of payment dispersal completely electronic, saving both time and money. Several different companies offer similar Direct Deposit services. National Payment’s (www.directdeposit.com) is profiled in this paper below.

6.1 How It Works“Direct Deposit is the electronic transfer of a payment from a company or organization into the

checking or savings account of employees, retirees, taxpayers, vendors or shareholders. The payment can be divided among several different accounts and, in many cases, between different financial institutions.” [9]

The process by which a company establishes Direct Deposit use and funds are transmitted is fairly straightforward. It consists of five steps [15]:

1) Employees Authorize Direct Deposit: Each individual employee must agree to the use of Direct Deposit by filling out a standard authorization form. 2) Direct Deposit installed in payroll software: The software is required to format payroll information according to Direct Deposit guidelines.3) Payroll File transmitted to National Payment: The company prepares an ACH file and delivers it to National Payment by electronic upload. Generally, the company must deliver the file at least four days prior to the desired transaction time. 4) Direct Deposit initiates payroll transfer: National Payment processes the next pay period's payroll, prepares an ACH file and delivers it to the employee's financial institution one or two days prior to the effective date [9]. 5) Federal Reserve transfers funds: The employee also has the option of receiving a payment stub notifying him/her of the transaction as well as the pertinent information in regards to the transaction. A relatively new feature offered by National Payment is EZStub which is an electronic and improved version of the traditional paper stub. On payday, the employee receives notification of the payment and is able to access both current and historical information via the internet in regards to salary payments [15].

6.2 Underlying TechnologyDirect Deposit relies exclusively on ACH technology to transfer funds. A detailed description

of this technology is provided in section 2.1. The standard transfer time for ACH transactions is approximately four days. Thus, money transfers are complete four days after being initiated.

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Figure 7. Direct Deposit payment flow [9]

6.3 Advantages and DisadvantagesDirect Deposit is an improvement over standard banks in just about every way. Net, it is far

less expensive than bank checks for all parties involved. NACHA estimates each Direct Deposit payment results in savings for the payer of as much as $0.60 [9]. “For a small company paying 2,500 employees each month by Direct Deposit, the average direct cost per ACH transaction is approximately $ 0.20. For a large company paying 30,000 employees each month by Direct Deposit, the average direct cost per ACH transaction is approximately $0.13.” [16] From the consumer standpoint, it has the capability of saving as much as $5.88 per payment [16]. And from a societal standpoint, “Figures from the U.S. Financial Management Service (FMS) indicate that the “all-in” costs (all relevant costs included) of producing a Federal paper check payment is $0.42, while the all-in cost of an ACH payment is $0.03, a savings of $0.39 per payment. (Source Byron Warren, Program Analyst, U.S. Department of Treasury, Austin Financial Center) [16]”

Additionally, Direct Deposit payments are far more reliable. The chance of having a problem with a paper check payment is 20 times as high as the chance of having a problem with a Direct Deposit payment [9].

6.4 Commercial Success Thus Far/Future ProspectsDirect Deposit is used by over 100 million people in the United States. More than 80% of large

companies (100+ employees) subscribe to the service while 35 million social security recipients use it for deposits [11]. Fifty-five percent of adults use Direct Deposit [16]. Additionally, the use of Direct Deposit is growing rapidly. “Transactions increased from 3.407 billion to 6.868 billion items in the six-year period from 1995 to 2000, an increase of 102%. This represents an average growth of approximately 17% per year.” [16]

Simplicity of process, extensive user base, low cost per transaction and unmistakable effectiveness ensure that Direct Deposit will remain a staple in the American financial process for years to come. No viable alternative is foreseeable on the horizon and, for the time being at least, none is necessary.

6.5 Similar ProductsAlthough there are few services quite like Direct Deposit, it is offered by a number of different

companies. Additionally, its counterpart, known as Direct Payment, allows consumers to authorize companies to electronically collect payments from their bank accounts.

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7. Features TaxonomyThe following table offers a quick summary of important data from sections 2 through 6. All of

the information has previously been provided in those sections with references unless explicitly stated in the legend below the table.

Bank Check C2C C2B (recurring) C2B (one-time) B2C

        On-line Offline  Processing Time 1-2 weeks 0-4 days 2 days 1 day 4 days 4 daysFunds Transfer Method Bank Check ACH, Credit ACH, Credit ACH Credit ACHCPT – Society $1-$5 - - - - -CPT - Party 1 NA - - - - $.13-$.20

CPT - Party 2 NA$0.30 + 2.2% ~$0.62 $0.20 1.70% -

FC - Party 1 NA -$0-$15 per

month - - varies

FC - Party 2 NA -~$400,000 one-

time$175 per

month$175 per

month -

MediumPhysical Paper

Internet/E-mail Internet/E-mail

Physical Card

Physical Card Electronic

Market Size - $100 billion $4.2 trillion $4.2 trillion $4.2 trillion$2.9

trillionMarket Penetration - 20% <1% 26% 26% 55%

Processing Time: Time from the initiation of a transaction to its completion.Funds Transfer Method: Underlying technology and processes employed.CPT – Society: Cost-per-transaction (CPT) that society must absorb. This applies exclusively to bank checks since they possess a multitude of different uses, users, and costs. The $1-$5 represents a cumulative estimate. Therefore, no other costs are attributed to bank checks; its additional cost categories are labeled not applicable (NA).CPT – Party 1: CPT for the sender.CPT – Party 2: CPT for the receiver.FC – Party 1: Fixed cost (FC) for the sender.FC – Party 2: FC for the receiver.Medium: The medium by which transactions occur. This is not to be confused with the medium by which processing takes place.Market Size: The overall size of the market. The C2B estimate is an aggregate combining recurring and one-time payments. The source for these estimates is [10].Market Penetration: The percentage of the market controlled by electronic transfer technology. Market penetration for C2C is provided in [10].

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8. Foreign SystemsIn this section, foreign methods of money transfer will be discussed. In addition to being

interesting from an academic standpoint, this will provide useful ideas that can be applied to the United States.

Australia, Canada, France, the United Kingdom and the United States rely heavily on bank checks as a medium for funds transfer while Japan and the rest of Europe employ direct funds transfer methods [22]. The direct credit funds transfer method most commonly used abroad is the GIRO system. These are initiated by the payer. When such a transfer is initiated by the payee, it is known as a debit transfer. Domestically, these types of transactions are ACH transfers. Additionally, the third and final major method of payment is physical cards – both debit and credit.

8.1 European GIROGIRO is a direct funds transfer method that is offered across most of Europe. Although it is

paper-based, it is far more efficient than American bank checks.

How It WorksGIRO services are generally available to bank account holders in Europe. Upon opening an

account, users receive a package of GIRO vouchers. When a user purchases a good or service, the counterparty sends the user an invoice containing the invoice number, counterparty’s name and address, bank account number, and required payment amount. This information is transcribed by the user onto the GIRO voucher and either mailed to the user’s bank or physically brought to the bank [21].

Banks have begun to utilize the internet for such transactions, allowing users to submit GIRO information via the web.

Underlying ProcessesA description of the methods underlying paper-based GIRO processing in Switzerland at Credit

Suisse was obtained from the website of FileNet, the firm that handles such processing.

“At Credit Suisse, the new GIRO process begins when bank customers mail payment vouchers to one of three bank centers in Zurich, Bern, and Geneva. There, an average of 40,000 vouchers are scanned into the FileNET system each hour using Elsag Bailey high-speed SlamNet scan stations.

After scanning, an ICR (Intelligent Character Recognition) engine called Emma2 automatically reads the data on the voucher. Errors or vouchers that cannot be read by Emma2 are sent to a post-processing unit where an operator can correct or manually enter data. Afterward, the data from the ICR process is sent to Credit Suisse’s host mainframe for payment processing.

The image of the voucher and the ICR data are then stored in FileNET’s OSAR (Optical Storage and Retrieval) library, where IMS software manages the archiving and subsequent retrieval of the images and corresponding data associated with each voucher transaction.

In addition to Elsag Bailey’s SlamNet and the Credit Suisse mainframe, another system integrated with FileNET’s IMS software is a signature verification system called SignBase from APP Infomatik. This verifies signatures on vouchers with amounts that exceed a threshold limit. Another product, SignCheck, automatically compares the signature on the voucher image stored in the FileNET OSAR library to the signature stored in the SignBase database. If a signature cannot be automatically matched, or when an exception occurs, an operator conducts a manual comparison.” [20]

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CommentaryGIRO most similarly resembles an ideal check processing system designed from the ground up.

It operates fairly similarly to bank checks yet takes advantage of many modern electronic efficiencies. However, it would be unnecessary to implement such a system in the United States. Besides the fact that the infrastructure and knowledge base simply does not exist for GIRO, the marginal value of GIRO over improved bank check processing is relatively minimal.

Advantages: Manual labor kept to a minimum ensuring low-cost per-item processing. Because the voucher is stored as a digital image, recall for dispute and customer service

purposes is inexpensive and instantaneous. Because customers personally deposit GIRO’s, there is less opportunity for fraud. GIRO is a direct deposit system meaning that once payment clears, no possibility of charge

back to insufficient funds.

Disadvantages: Inherently paper-based system results in unnecessary costs due to postage, customer time, and

processing.

Figure 8. Volume of Funds Transfer Payments [22]

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8.2 Bank ChecksThe first part of this section will discuss foreign bank check systems in general. The second

will zero in on specific cases.

General DescriptionAs discussed previously, bank check processing is an inherently costly and time-consuming

process. Some countries, particularly the Nordic European ones, have dealt with this problem by imposing penalties for their use. This has proven to be extremely successful as they have managed to steer their populace into almost exclusively using alternative methods of payment.

Many of the countries have also sought to reduce the costs associated with bank check processing. One method is known as electronic check presentment (ECP) in which check information is routed electronically. “Electronic information typically includes a routing or identification number for the paying bank, the account number on which the cheque is drawn, and the serial number and amount of the cheque. Additional information may include signature or endorsement information, as well as information regarding intermediary banks.” [23] However, physical presentment might still be required after the fact due to legal reasons resulting in ECP without check truncation. The check would still physically be sent; however, it would be sent after the fact and would not be required for processing.

In the case of many countries, one or both of these cost cutting methods is allowed for checks whose value falls below a certain threshold level. Above that level, physical inspection and processing of checks is still required.

Potential problems do exist with such electronic cost cutting methods. For one, electronic transmission of a large number of digital files can prove to be a significant cost. For another, digital images do not offer the same security as physical checks. “Electronic images, however, may not provide exact copies of all aspects of a physical cheque, although both image technologies and banking practices are evolving rapidly. For example, certain endorsements on the back of a cheque may be captured imperfectly by an image. Fraudulent alterations of a cheque or physical tampering with the document may also be more difficult to detect than in the case where a physical examination of a cheque (ascertaining that the paper is of a certain quality and weight, for example) is possible.” [23]

Specific Cases

Sweden: “Swedish banks have implemented a clear policy of reducing the number of cheque payments, because these are considerably more costly than alternative means of payment, such as credit cards. To this end, one of the major banks introduced a rather high charge (SEK 15 or €1.7) on all cheque transactions at the beginning of the 1990s. The other banks subsequently followed this example and also imposed heavy fees, with the result that the use of cheques has been drastically reduced.” [24] As a result, only 4 million checks, a miniscule number, are used each year in Sweden, a country with a population of roughly 9 million people.

Norway: Norway has followed a similar track to that of Sweden. It has implemented policies designed to discourage bank check use. However, rather than attempt to prevent their use entirely, Norway has taken a more even-keeled approach by instead making transaction costs representative of their true costs. “Norwegian banks have been encouraged by the central bank to institute per transaction fees that increasingly reflect the differential bank costs of producing different types of payments.” [26]

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Canada: The Bills of Exchange Act and the Canadian Payments Association Act of 1980 prevent check truncation in Canada. ECP is allowed, but only for provisional settlement; final settlement requires the physical check. However, in the case where the paying and receiving banks are the same financial institution, truncation is legal.

Belgium: “In Belgium, the first country to implement cheque truncation in the mid-1970s, truncation is mandatory for low-value items, with information converted to electronic format and processed through the Centre for Exchange and Clearing (CEC), the country’s ACH. Cheques are truncated at the collecting bank and copied onto microfilm; the paper item is destroyed at the end of six months. In the event of a dispute, the physical cheque (or after six months a microfilm copy) is returned to the paying bank. High-value cheques are subject to manual procedures.” [23]

Germany: Truncation of low-valued checks, those with a value below approximately twenty-five hundred Euros, first became legal in 1985. In 1998, it became mandatory with the implementation of the “Agreement on cheque collection.” “According to the agreement, the first bank involved converts the submitted cheques on the basis of the information contained in the code lines, microfilms the original cheques and collects - possibly using the clearing and settlement facilities of the Bundesbank - the value in paperless form.” [23] For higher valued checks, the GSE Procedure is used and the Bundesbank exclusively handles processing [23].

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9. ConclusionThe bank check system is at a crossroads. The industry is moving away from its current state

in which processing is inefficient and use is widespread. Instead, there are two simultaneous and separate tracks that are being followed.

Track ITrack I represents the scenario in which bank check processing is made more efficient through

the use of truncation and ECP. Much of this work is being handled by the public sector. In addition to the iCheck system that was previously mentioned, the Federal Reserve has also proposed a law to Congress that “would facilitate check truncation. The proposed Check Truncation Act is designed to foster payments system innovation and enhance the efficiency of the payments system by reducing some of the legal impediments to check truncation that exist under current law.” [19] With the proposed changes, checks could be transmitted electronically from location to location without requiring costly and time-consuming physical shipment. At the same time, the law would not mandate that checks be dealt with in that manner. These changes would also have far reaching implications by allowing greater innovation.

As the graph below shows, the US is by far the greatest user of checks on a per capita basis. At the same time, ironically, the US has some of the least developed bank check processing techniques. The proposed changes would help to ameliorate that situation.

Figure 9. Per Capita Cheque Payments for Various Countries [22]

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Track IITrack II represents the scenario in which bank check use is fazed out in favor of faster, cheaper,

and for the most part, better alternatives. The private sector is handling much of the work for this track. Among the alternatives, B2C and C2B (one-time) have been around the longest and have had the greatest market penetration. At the same time, they currently have the least room for growth. C2C and C2B (recurring) alternatives on the other hand are newer, and in many ways more exciting. C2C in particular, with its market leader Paypal, has the capability to revolutionize the way that commerce is conducted. Its Mobile Phone Payments system might even prove to be as ground-breaking as the credit card, with the help of the increasingly ubiquitous cell phone. C2B (recurring) alternatives have not met with the same success as C2C alternatives. That is not to say, however, that they will not eventually be successful. Their growth rate is more likely to mirror that of traditional technologies as it is faced with the chicken-and-egg expansion problem.

Figure 10. Transaction Times for Alternatives vs Standard Bank Checks

Overall SolutionThe best case scenario would be for check use to be phased out and for alternatives to replace

them. Of course, with the domestic infrastructure for check use in place as well as consumer habits firmly entrenched, this is no easy task. However, steps can be taken to improve the situation in the near term. The wheels are already in motion to implement Track I while steps can be taken to assist Track II.

For this, we can look to the example of Sweden and Norway. The U.S. should implement marginal costs for bank check use that at the very least imposes fees for use that are representative of true cost. This should definitely be done at the bank level and possibly at the retail level as well. For example, a customer using a check to purchase an item at a store should be charged by his/her bank for the processing cost of that check. The retailer might also choose to add a surcharge for its own processing cost. In this manner, transaction use would more closely follow free market economics and the costs to society would be minimized.

At the more extreme level, as is the case with Sweden, disproportionate fees could be imposed that would discourage bank check use altogether. This is dangerous for a number of reasons. For one, this would undoubtedly cause a public backlash as consumers accustomed to having free use of bank checks would likely be infuriated by the new costs. Additionally, it is doubtable whether the bank check alternatives have the infrastructure in place to handle the inevitable onslaught of customers that such a move would cause. For example, the CheckFree service currently has the capability to handle a

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maximum of thirty million customers [17]. While this number is far greater than its present client base, it is not enough to handle a significant portion of the U.S. C2B (recurring) market. Thus, it would be safer to make implementation of fees a gradual process rather than a sudden shock.

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10. References[1] Figueroa, Joseph N. “iCheck: An Architecture for Secure Transactions in Processing Bank

Checks”. June 1997.

[2] “Understanding The ACH Network: An ACH Primer”.http://www.nacha.org/OtherResources/buyers2002/BG_ACH_Primer.pdf

[3] Interview with Premal Shah, Paypal(650) 248-7736

[4] Paypal Websitehttp://www.paypal.com

[5] Marlin, Steven. “Check Processing Gets A New Image.” May 6, 2002.http://www.banktech.com/story/whatsNews/BNK20020506S0002

[6] CheckFree consumer websitehttp://www.checkfree.com

[7] Interview with Bob Miszkiewicz, Sr. Sales Executive, First Data(201) 476-5745

[8] Stefanadis, Chris. “Why Hasn't Electronic Bill Presentment and Payment Taken Off?” Current Issues in Economics and Finance, July/August 2002, Volume 8, Number 7.http://www.newyorkfed.org/rmaghome/curr_iss/html/civ8n7/civ8n7.html

[9] Direct Deposit websitewww.directdeposit.org

[10] Selby, Jack R. Vice President of Corporate Development, Paypal. “Paypal.”http://www.chyp.com/forum/mpapers4/selby.pdf

[11] Matthews, Deborah. “Financial Institutions Partnering With Corporations: Innovative Strategies For Promoting Direct Deposit.” http://www.nacha.org/OtherResources/buyers2002/BG_Innovations.pdf

[12] Cardweb.com Inc.www.cardweb.com

[13] “Debit Cards: PIN or Sign?” American Financial Services Association. August 2002.http://www.spotlightonfinance.org/issues/August02/Stories/story5.htm

[14] “Debit Card Use Grows vs. Credit Card Use.” American Financial Services Association. January 2002.http://www.spotlightonfinance.org/issues/January02/Stories/story8.htm

[15] National Payment website

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www.directdeposit.com

[16] Tinucci, Joseph D. “Business Case for Consumer Direct Deposit / Direct Payment.” A Study for NACHA and the Direct Deposit and Direct Payment Coalition. 2001.http://www.nacha.org/OtherResources/tinuccistudy01.doc

[17] CheckFree corporate websitewww.CheckFreeCorp.com

[18] Spinner, Jackie. “The Check’s Last Writes.” Washington Post. February 9, 2003.

[19] Proposed Check Truncation Act. Federal Reserve Board. March 14, 2003.http://www.federalreserve.gov/paymentsystems/truncation/default.htm

[20] “Banking - GIRO Payment Transaction Processing.” FileNet.http://www.ufc.com/XMLData/Data_Files/SwissBank.pdf

[21] “Bank GIRO Credit Collection.” PacNetServices.http://www.pacnetservices.com/bankgiro.html

[22] “Retail Payments in Selected Countries: A Comparative Study.” Bank for International Settlements. September 1999. http://www.bis.org/publ/cpss33.pdf

[23] “Clearing and Settlement Arrangements For Retail Payments in Selected Countries.” Bank for International Settlements. September 2000.http://www.bis.org/publ/cpss40.pdf

[24] “Blue Book Sweden.” European Central Bank. June 2001.http://www.ecb.int/pub/bluebook/BlueBook01Sweden.pdf

[25] Gupta, Amar. “Technology – Check Processing.” LokVani.com. February 2003.

[26] Humphrey, David B., Keppler, Robert and Montes-Negret, Fernando. “Cost Recovery and Pricing of Payment Services: Theory, Methods, and Experience.” World Bank. August, 1997.www.worldbank.org/html/dec/Publications/Workpapers/WPS1800series/wps1833/wps1833.pdf

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