Bank Notes and Stored-Value Cards: Stepping Lightly into the Past

Stored-value cards are among the most interesting payments innovations of recent years. Balances on these cards can typically be transferred without involving a depository institution directly. In this respect, the stored-value card (SVC) represents a new form of circulating bank liability reminiscent of the bank notes that made up a large share of the U.S. money supply in the nineteenth and early twentieth centuries. Like bank notes, SVCs replace coin and paper currency in retail payments, shifting the composition of the U.S. monetary base from government and central-bank liabilities toward private bank obligations.