Random Observations: Why do we use checks?

Several months ago I went to the Netherlands. They don’t have checks there. What do they do instead?

Well if you’re my utility company and you want me to pay you, you send me the information I will need to deposit money in your bank account. I go to my bank and transfer money there. You get notified when it arrives. The technical name for this in English is giro transfer.

Now stop and think about how many problems this solves. I never hand out my bank details to anyone. You never have to deal with a bounced check. There is no possibility of anything like a kiting scheme. And the only practical change is that instead of my giving you information that can be used to draw from my account, you give me enough information to put money into your account.

The moral is that checking systems are fundamentally flawed. The design of a giro transfer system is fundamentally sound. Unfortunately tradition is set so that checks are here for a while to come. And people are honest enough that the problems don’t generally rise to the point that would make people object. Sure, the security problems are obvious when you think about it. But as always when people aren’t being bitten by the problems, people forget about the security implications.

via Random Observations: Why do we use checks?.


One thought on “Random Observations: Why do we use checks?

  1. This seems a lot like public key crypto– where you advertise how to send to me and only I can receive it, but you don’t have any ability to send money from my own account.

    I hadn’t thought about it before–why do we tolerate checks like this in America?

    Needless to day, sending ξ should have a similar mechanism.

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