Question

Describe the components of the U.S. payment system

Answer 1

The U.S. payment system consists of two main components – banking system and the payment mechanisms.

The Federal Reserve is the fiscal agent of the U.S. treasury. The Federal Reserve functions as the central bank of U.S. to ensure the effectiveness of the payment system of the country and that works for both businesses as well as for consumers in a secure manner.

The U.S. payment system is now earmarked with electronic image interchange. This does not require paper checks to be physically transported. This has led to substantial reduction in the cost of processing a payment. The U.S. payment system is now making use of technology to take advantages of speed and cost reduction.

A recent change in the U.S. payment system is that with regards to emergence of closed payment communities. A prominent example of this is PayPal.