will almost certainly decrease further. the reserve banks are also increasing their use of technology as part of a longer - term business strategy to facilitate the greater use of electronics in check processing. that strategy includes providing products and services that help banks take advantage of check 21. to date, the adoption of those services has been slow, however. on average, only 400, 000 of the 50 million checks the reserve banks collect each business day involve the deposit of digital check images or the printing of substitute checks. using internet technology, the reserve banks are improving customers'access to such core clearance and settlement systems as ach and fedwire. they are also offering new services consistent with heightened customer account activity and risk management capability. any discussion of the federal reserve's evolving role in payments would be incomplete without a review of the fed's role vis - a - vis its private - sector competitors. from its inception, the federal reserve considered its role in payments to be an important component of its central bank responsibility. the fed's check and ach services, in addition to fedwire for commercial transactions, have provided a consistent, reliable, and efficient payment capability that has enhanced the performance of the u. s. economy. while the fed has had a significant role in payments, it has not been the only player. the monetary control act of 1980 ( mca ), by requiring that the fed explicitly price all the fee services it offers to banks, establishes, as a matter of public policy, a competition between the reserve banks and the private sector in the provision of payment services, to ensure that the efficiencies of market competition are realized fully. other legal and policy limitations on the reserve banks also affect the fed's competition within the private sector in the provision of payments services. first, the reserve banks, as directed by the mca, must make their payments services available to all depository institutions - in contrast to private - sector competitors, which may offer their services to a limited, more profitable market segment. second, the reserve banks, again as directed by the mca, must recover, over the long run, the full direct and imputed costs of providing payments services to depository institutions. while the reserve banks'competitors also must recover their costs, they may, in addition, offer non - payment - related services that the reserve banks may not offer, thereby giving competitors greater flexibility in recovering payment service costs. this mix of competition and statutory obligation is highly beneficial to consumers and businesses alike and is

system, such as the interbank collection of checks, and specific consumer rights and protections, such as consumer liability for unauthorized electronic funds transfers. these authorities are derived from statute. with regard to the operational aspects of the payments system, the federal reserve is responsible for regulating the operations of the reserve banks, particularly their check collection and wire transfer activities. the federal reserve also has regulatory authority, under the expedited funds availability act and check 21, for various aspects of the collection and return of checks by banks. the federal reserve's regulatory authority over electronic payment operations is limited to those of the reserve banks. instead, the private sector, through bank associations, card networks, and other cooperative rule - setting bodies, establishes many of the operating rules for electronic payments. for example, nacha - the national automated clearing house association - sets the operating rules and establishes contractual liabilities and warranties among the banks that participate in the ach system. similarly, visa, mastercard, various electronic funds transfer networks, and card companies establish the particular operating rules their members must follow in their credit and debit card operations. a potential implication of this distribution of rulemaking authority within the payments system is that as more payments are made by ach or by debit and credit cards, the relative importance of private - sector rulemaking may increase. at the same time, as checks are increasingly collected electronically, the federal reserve may need to use its regulatory authority over the interbank check collection system more actively. in particular, we will be monitoring the banking industry's experience with the board's regulations implementing check 21 and will revisit them over the next few years to determine whether any refinements are necessary. with regard to consumer rights and protections, the board has a more extensive role with both checks and electronic payments. for checks, the federal reserve's statutory authorities relate to the obligations of banks to make deposited funds available to their customers and to recredit their customers for losses suffered as a result of receiving a substitute check. we take these responsibilities seriously. for example, we monitor developments in the check - collection system on an ongoing basis to determine if the maximum permissible hold periods in regulation cc should be shortened. if we find sufficient improvement in check - collection and return times, particularly as more banks make use of check 21, we will reduce the funds availability schedule accordingly. for electronic payments, specifically debit cards and ach, the federal reserve has equally important responsibilities. they include establishing