Digital Transactions reports analysts at the Federal Reserve Bank of Chicago and the head of the rules-setting organization for image exchange are proposing a new form of payment that would allow consumers and businesspeople to write checks on mobile phones and send those checks as digital images to individuals or businesses.
The proposed electronic payment order, or EPO, would take advantage of existing image-exchange systems to route transactions. But unlike images of paper checks, the EPOs would be digital from the start.
"Today, smart phone ownership may appear to be limiting (for EPOs), but projected growth of those devices suggests that within two years, smart-phone ownership may eclipse Internet access," Bob Meara, a senior analyst at Celent LLC, told Digital Transactions.
So far, the idea is only in the conceptual phase, with no action yet taken to move it to market. A Chicago Fed paper suggests mobile check images, however, could be integrated into Web-based deposit-gathering strategies and rely on private agreements between banks to regulate EPO transactions.
"We wanted to get people thinking about this idea and how it would be feasible," said Katy Jacob, research specialist at the Chicago Fed and one of the paper's six authors. "We have a small group of bankers we meet with. People are interested in how it would work."
The 28-page paper, entitled "Digital Checks As Electronic Payments," appeared in November. Four of the authors are with the Fed. A fifth, Bruce Summers, retired from the Fed in 2007. The sixth is David Walker, president and CEO of the Dallas-based Electronic Check Clearing House Organization.
To pay with an EPO, a handset user would use software on his device to fill out and sign a check that would appear on the device's screen. The software would then send the encrypted image to the payee via the wireless network.
