The rise of the Internet and of e-commerce promised a revolution in the payments flow in wholesale banking. It seemed that a system that had been dominated by checks and that relied heavily on manual intervention at various stages in the process would at last move toward an automated, fully electronic state.
Additional Information
In an ideal world, a payment instruction and its accompanying remittance information would flow in a fully electronic manner from a remitting company’s systems out through the payments systems and the banks and into the receiving company’s systems, without manual intervention. In the real world, the flow remains firmly paper-based.
The rise of the Internet and of e-commerce was seen as a positive factor for corporate payments. It allowed the introduction of new business models that would leverage the power of the Web and bypass the clumsy and outdated processes in use at that time. Yet the ebbing of the e-commerce wave has left the payments flow issue unresolved.
Although the Federal Reserve estimates that check volumes in the United States have decreased since the mid-1990s, most if not all of that has been driven by increased use of credit and debit cards reducing consumer use of checks. There is little evidence, either statistically or anecdotally, to indicate any decrease in business-to-business check volume.
In order to fix the problem of the transmission of end-to-end remittance information in today’s corporate payments flow in the US, the best chance of success in the short term lies in the application of technologies that can be integrated into the current infrastructure of the payments flow, not with those that seek to define new pathways or infrastructures.
Banks must drive the progress away from checks to electronic corporate payments. However, the banking community seems reluctant to take on this effort, and banks’ lack of a strategic vision for the payments system may mean that checks will continue to dominate for many years to come.
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