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Tuesday March 30, 06:10
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Paper Checks Unlikely To Vanish After Check 21
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From October 28, 2004, when the Check 21 Act comes into effect, US banks will be able to use check images in place of paper checks, but until 2006, only the larger banks are expected to use substitute checks. US payments consultant, Patti Murphy, notes that as about 10,000 banks need to prepare for electronic checks, migration will take time, as larger banks are ready for imaging, but need to build networks to exchange images. Later in 2004, the Small Value Payments Co (SVPCo) will speed this process by linking banks to its network for the exchange of check images.
Bankers are speculating about the impact of Check 21, given predictions that checking volume in the US will increase by 14 per cent by 2005. While over 180 million US consumers have a checking account, the Federal Reserve found the number of checks written in the US to have peaked in the 1990s, before falling to 42.5 billion in 2000 from 49.5 billion in 1995. E-payments are replacing checks used for business and government payments, according to the Federal Reserve, but consultant Patti Murphy warns that business fraud may spike with check conversion.
Businesses currently use security features on paper checks, and as these do not survive imaging, Murphy believes corporate checks may be misappropriated or duplicated after digitization. US banks could save USD 2 billion to 3 billion per year by replacing paper checks with images, but over half of bank customers still do not receive substitute checks if a check is converted at the POS. From the viewpoint of consumer groups, check imaging benefits banks and not consumers in terms of dispute resolution, imaging security, and safeguards to keep consumers’ payment information secure.
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