Does anyone still write checks

The large bank, which must adopt ACH for all of its branches together, is not likely to adopt ACH in response to conditions in the town where its small branch is located. Thus, a local bank A that is based in the town will think of the adoption decisions of the branches of the big bank B as unaffected by its own decisions of whether to adopt ACH. Gowrisankaran and Stavins derive formal estimates of the magnitudes of the network externalities from this sample and use them to compute the expected probability of adoption if there were one small bank versus two or more small banks in the market.

This again suggests that the magnitude of the network externalities is substantial. Several different tests provide evidence of substantial network externalities in the market for ACH. This implies that part of the reason for the continued dominance of paper checks is a chicken-and-egg problem, where ACH is not more widely used because of a lack of a critical mass of users.

Most new payment technologies are inherently networks. Thus, insofar as new payment technologies can increase the efficiency of the payments system and lower transactions costs, there is a potential concern that network externalities may cause banks and consumers to underadopt many of them. The results suggest that we should consider mechanisms that might facilitate the adoption of new payment technologies by allowing firms to internalize the network externalities.

Reference [URL accessed September Gowrisankaran, Gautam, and Joanna Stavins. This publication is edited by Sam Zuckerman and Anita Todd. Permission to reprint must be obtained in writing. Box San Francisco, CA Skip to content Readability Tools. Reader View. Dark Mode. High Contrast. Reset All. Economic Research. More Economic Letters. Gautam Gowrisankaran. As recently as , half of the As an example of the tradeoff, rather than make 22 cents in interchange on a debit payment, the credit union is paying 25 cents for the member to write a check, despite the fact that in either case, the members pays the same amount, said Grilli.

Check 21, which took effect , allowed paper checks to be replaced with a digital version which eliminated the need to handle and transport paper documents and also eliminated the return of the canceled check. Many other countries have abolished paper checks completely. Fear of fraud. Most check writers mistakenly believe that checks are somehow safer, said Grilli.

Lack of options for person-to-person P2P payments. Not quite. In fact, one of the reasons debit and credit cards became more widely adopted is that they were considered a more secure method of making a purchase. I refuse to pay for the pleasure, so I mail them a check 4x per year. The only other reason I ever write checks is when I need to give someone a wedding gift.

The A. Personal Finance.