Banking Over the Past Decade Term Paper

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Such a strategy allows banks to reduce the cost associated with paper check conversion (Bruno, 2002). In addition this strategy reduces the number of fraudulent checks that are written (Bruno, 2002). The author also insist that this strategy may lull some customers into actually using debit cards or check cards at the point of sale, as opposed to using traditional checks (Bruno, 2002).

Indeed automation will be an important part of banking well into the future. An article found in Community Banker asserts that automation is key because it allows for the electronic transmission of checks. In addition, many banks are using automation for electronic signatures which will allow for loans and other financial services to be implemented over the internet. According to the author this automation also improves workflow and performance because it is more streamline and therefore less confusing.

The article contends that the aim of this automation is to make the banks transactions as paperless as possible ("Automation is the Answer at T. Bank," 2005).

Although the Banking System is moving toward becoming paperless American's still write more checks per person than any other industrialized nation. An article entitled "Why do we Use so many checks" asserts that in the year 2000 49.6 billion checks were written and were valued at $47.7 trillion. The author explains that unlike other countries the United States experienced an increase in check writing during the 1990's which has contributed to the continued use of checks. As was previously mentioned in this discussion the number of checks that are now being used has began to decrease, but it is still a significant amount. The article points out that in other countries banks have been able to make checks all but obsolete by charging considerably more for check transactions than for other forms of payment. The author asserts that The decline in check usage across most countries indicates that, given market incentives, there is a movement toward electronic instruments.

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Electronic alternatives to accessing transaction accounts for purchases are held to be less expensive than checks. Humphrey and Berger (1990) were the first to calculate the total social cost of each instrument in the United States. Social cost is the sum of the real resource cost borne by each participant to convert a given payment into good funds. They found the social cost of a cash transaction to be the lowest at 4 cents and a credit card transaction to be the highest at 88 cents. An ACH payment, an online debit transaction, and a check transaction have social costs of 29 cents, 47 cents, and 79 cents, respectively (Chakravorti & Mchugh 2002)."

The research seems to suggest that paperless banking is the end goal of many financial institutions and as such the traditional check must become obsolete. According to Gup (2003) although banks want to move toward a more paperless work environment and overall system, many consumers prefer a combination of electronic services and getting advice from a personal banker. The book asserts that Experience with strictly online banking services has been mixed. Morgan Online, J.P. Morgan's Internet-only private banking service, found that high net worth customers preferred a combination of Internet-based tools as well as a close relationship with a personal banker (Labate, 2001). Similarly, Bank of America's CEO, Hugh McColl, reported that its most sophisticated Internet customers used all avenues of banking and visited a branch banking center at least once a month (Bennett, 2000). Finally, Charles Schwab, a leading online broker, reports that about 70% of its new accounts are opened at branch offices rather than online (Gup 2003).

Conclusion

The purpose of this discussion was to argue whether electronic payments are the best method of payment over the traditional check. The research indicates that electronic payments are more convenient and less expensive to process for banks and consumers. The research also indicates.....

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