From Drafts to Checks: The Evolution of Correspondent Banking Networks and the Formation of the Modern U.S. Payments System, 1850–1914

Checks remained local payments instruments throughout virtually the entire nineteenth century. Their significant use in interregional transactions dates only to the 1890s. We explain their lagged spatial diffusion by the evolution of centralized payments institutions to coordinate transactions among myriad banks, not real technological changes to “annihilate” distance. The pivotal institutions were large correspondent banks, especially in New...