Journal Article

Trends in the efficiency of Federal Reserve check processing operations

Abstract: The Monetary Control Act of 1980 requires the Federal Reserve to charge customers for financial services, with the intent of improving the efficiency with which Fed offices deliver those services. Prior studies found little improvement in the efficiency of Fed check processing operations after pricing was implemented in 1982. This article examines the efficiency of Fed check operations using a longer sample period (1980:Q1?2003:Q3) than previous studies and new methods for estimating efficiency. The authors find that the median office became somewhat less efficient when pricing was introduced, but that efficiency improved through the 1990s. Although they find that Fed offices became somewhat less efficient on average after 1999, this might reflect adjustments associated with declining check volumes and implementation of a common operating platform across System offices.

Keywords: Check collection systems; Payment systems;

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Review

Publication Date: 2004

Volume: 86

Issue: Sep

Pages: 7-20