![]() Competition and banking industry consolidation also may affect the check processing business.Other means of payment (like debit cards and automated clearinghouse payments) now account for a large and growing share of total payments across the nation (Figures 2 and 3).The use of commercial checks has been on the decline over the last 20 years and this also has reduced the number of commercial checks processed by the Fed (Figure 1).In 2012 nearly all commercial checks processed by the Fed were converted to electronic images for presentment, payment, and record keeping. Paper checks have virtually disappeared from the clearing process, following the adoption of the Check 21 legislation in 2004.Legislation, technology, and competition have had an important impact on all check processers, including the operations of Federal Reserve Banks: This analysis will focus on the commercial check business as opposed to government check processing. 2 As the Treasury’s bank the Fed also has a large share of the government check processing business as well. The Fed has had a commanding presence in commercial check processing or clearing – the delivery of a check between paying and receiving banks – maintaining in the range of 30 to 40 percent of the market share in recent decades. 1 Processing and clearing checks has long been a key part of the operating side of Federal Reserve Bank business activities – along with coin and currency services and electronic funds transfers. Background: Rapid changes in payments and check processingĪs the central bank for the United States, Congress has given the Fed an important role in the nation’s payment system.
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