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Interstate banking and the payments system

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Abstract

Interstate banking will improve the efficiency of the payments system. This will occur because the number of handlings for multiple-bank payments (transit items) will fall and because some multiple-bank payments will be transformed into single-bank payments (on-us items). These effects are simulated using data on the current cross-section relationship between banking structure and check clearing patterns in a multinomial logit model. The Federal Reserve, which currently processes almost one-third of all checks, is predicted to lose 43 to 60 percent of its market share. The annual impact is expected to be gradual, however, since interstate banking will be phased in and because of offsetting growth in the total check clearing market.

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Authors and Affiliations

  1. Board of Governors of the Federal Reserve System, Washington, D.C.

    Allen N. Berger

  2. Federal Reserve Bank of Richmond, Richmond, Virginia

    David B. Humphrey

Authors
  1. Allen N. Berger
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  2. David B. Humphrey
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Berger, A.N., Humphrey, D.B. Interstate banking and the payments system. J Finan Serv Res 1, 131–145 (1988). https://doi.org/10.1007/BF00116384

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  • DOI: https://doi.org/10.1007/BF00116384

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