Check 21: Good for bank customers?

It's been more than two years since Check 21 legislation passed in the U.S., and what has it done for bank customers?  Not commercial customers, mind you, but folks like you and me who have regular checking accounts with or without online bill paying. Take me for example.  I pay the vast majority of my bills online and write only one or two checks a month.  I have direct deposit for my paycheck, but also collect several checks a month from my writing gigs and other sources of income.  What has Check 21 done for me?

Let's look at the accounts receivable end for a sec.  My paycheck (almost) always hits my account on payday.  No real issue there, but when I get checks for deposit, out of state checks still take five business days to clear.  In-state checks typically take 3-5 days (usually closer to five).  The float period hasn't changed one bit from the time this legislation passed.

As for the accounts payable end, as I mentioned I tend to pay my bills online.  I write one check a month.  Everything else is electronic.  As soon as I send an electronic payment, that money comes out of my account immediately.  So the bank is getting more of a float period on my money than it would if I had used a check.

Now, let's take a look at what benefits the bank gets from Check 21:

  1. The costs for shipping physical checks from location to location is greatly reduced, since Check 21 created a new negotiable instrument that can be transmitted electronically.  There's also some savings for the banks built into the notion of not having to give me canceled checks with my statement anymore.
  2. Banks take money out of the hands of the customer sooner (see above) and hang onto it for the same length of time before clearing it to the receiving party, so they're getting a longer float period and thus, more money.
  3. Deposited checks take the same length of time to clear, but the electronic transmission happens much faster, so banks get to hang onto money longer, get a longer float period, and thus get more money

With all of this extra money and more efficient processing in the hands of the banks, you'd think customers would see decreased fees, faster clearing of deposits and better service.  Anyone seeing that?  Not me.  The deposit line at my bank today was at least two dozen people deep, and took half an hour.  My bank fees have increased, not decreased.  It still takes the exact same length of time for banks to give me access to a deposit.

So somebody please explain to me how Check 21 was anything but a giant gift to banks.  They're making more money.  We're stuck with the same (or worse) level of service.

One of the things I'm learning running a small business is that the invisible hand of capitalism can't always be counted on when one of the forces working against it is institutional inertia.  If banks, as an industry, are used to making money the way they do, a reduction in their costs of doing business often isn't enough to guarantee that customer service will improve or that savings will be passed on to the customer.

A parallel can easily be drawn to the advertising industry.  Agencies and marketers alike know that greater efficiencies can be had by revamping advertising plans to include a higher percentage of online advertising.  Do all companies do this?  No, because they're combatting institutional inertia - it's more profitable to go with the status quo until it becomes a distinct competitive disadvantage to continue to avoid change.  There's always a sizeable gap involved between the time an efficiency is identified and when it becomes reality, and that's largely driven by institutional inertia.

So how long will it be before banks start passing on the savings and profits they're getting due to Check 21?  Will it take as long as it took online advertising to hit its stride?  10 years?  15 years?  More?