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Policy Discussion Paper, No. 5, November 2009
Digital Checks as Electronic Payment Orders

This paper explores the potential for a new type of electronic payment order (EPO), in the form of an entirely digital check. The digital check EPO could leverage the existing electronic check infrastructure and provide a convenient, low-cost payment option for both consumers and businesses, based on a payment method that they have found useful for many years. The overall efficiency of the payment system would increase as a result. The authors sketch out how this type of EPO might work both technically and legally. They suggest the opportunity might be ripe for a relatively small number of high-tech service providers to capture a significant share of the retail deposit market by building robust secure software on smart hand-held devices, rather than exclusively focusing on building bank branches to gather retail deposits.

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