The Need for Speed: Demand, Regulation, and Welfare on the Margin of Alternative Financial Services

We use a nonlinear reduction in a bank's check-cashing fees and variation in regulated check-clearing times to identify the elasticity of demand for cashing checks rather than depositing them. We find that an extra day of check-clearing time makes account holders 65.5% more likely to cash a check than deposit it, which implies they are willing to pay $11.17 per day for faster access to their funds – an effective annualized discount rate of 11,054% for the average check. We use this elasticity to evaluate recent proposals that mandate faster check-clearing times.