Efficiency and Technical Progress in Check Processing

By lowering the transaction costs associated with barter, a payments system greatly facilitates the exchange of goods and services. Although vastly improved over the years, the process of transferring funds remains costly, and the evolution of the payments system has been at least partially determined by efforts to trim these costs further. Increasing the productivity of the payments system improves economic welfare both by releasing resources to other sectors of the economy and by lowering the effective purchase price of goods and services. In addition to its roles as the nation's central bank and as the primary federal regulator of state member banks and bank holding companies, the Federal Reserve System is also a major provider of payment services. Ordered by the Federal Reserve Act of 1913 to ensure the efficiency of the payments system, the central bank has