A well functioning payment system is crucial to a well-functioning economy. Technological revolutions in the fields of information technology and communications have given rise to a new generation of electronic based payment systems. While these systems have risen to dominate the retail payment system in most other developed nations, the United States still relies heavily on the paper check. It has been estimated that by failing to convert over to less costly electronic payment systems, the United States is missing out on billions of dollars in cost savings. This report reviews the current structure of the U.S retail payment system, details the major concerns that have been raised in the academic literature, and outlines the major challenges that public policy makers face as the payment system continues to evolve.
