of new technologies to conduct traditional payment system operations in more efficient and effective ways will also drive change. both banks and end - users of the payment system are now discussing many issues and ideas. the committee has asked a group of staff to conduct further discussions with interested organizations and bring back to the committee a broader view of the current debate in this area. finally, the committee is continuing to encourage survey research on the use of different payment systems. the federal reserve's retail payment office is currently sponsoring several surveys to obtain more accurate data on both electronic and check payments being made in the united states. it is particularly important that we have a better idea of how many checks are being written in order for the banking industry and the public to understand better and plan for the evolution of the payment system. the technical work of “ cleaning the numbers ” collected in the surveys is continuing, and we hope to publish data from the survey later in the year. conclusion in conclusion, i would like to emphasize that our financial system is continuing to evolve, as it must in a dynamic and competitive market economy. financial consolidation at the national level has occurred relatively quickly, although much less so at the level of individual banking markets. the recent g - 10 study did not find fundamental problems with developments to date. it did, however, outline some practical steps the authorities can take to help better manage potential risk to the financial system and outlined a number of areas that should be monitored and analyzed further over the longer term. overall, the us payment system continues to evolve slowly, but there have been steady changes and a great deal of experimentation over the past few years. although we are not likely to see paper payment instruments disappear, electronic payment systems are being used more widely and creatively than in the past. on - line banking and other services are giving bank customers new and convenient mechanisms to initiate and receive electronic payments. however, simple ideas such as electronic bill payment by consumers and businesses have turned out to be more of a challenge than we imagined a few years ago. in addition, as the market continues to experiment with new systems, the old themes of reliability, security, privacy, and confidence need to be repeated often. speaking as a member of the payments system development committee, i would also like to emphasize the willingness of the committee members and the fed staff to discuss with private - sector organizations their new ideas, insights, and views about the future of the payment system. i have found that our discussions so far have all been very productive

sale, or pos. in some countries, such as canada and the united kingdom, this substitution has progressed substantially, and consumers now use debit cards widely. in the united states, we have seen the use of debit cards grow strongly over the past few years, fueled by the use of signature - based cards developed by the credit card networks. another recent development is the increasing adoption of programs to “ convert ” or “ electronify ” checks at the point of sale. these programs typically use a check, or information from a check, to generate an electronic payment from the consumer to the merchant that is cleared through the automated clearinghouse ( ach ) or electronic funds transfer ( eft ) networks. in a sense, these programs turn a check into a disposable debit card. this analogy raises the question of what we can learn from the use of checks to initiate electronic payments and whether these programs are simply a transition stage to a more extensive electronic payment system. i believe these programs continue to deserve monitoring as we go forward. this evening i would also like to mention an old debate about the merits of check truncation, a debate that goes back at least to the late 1960s and early 1970s, when many observers of the payment system first began predicting the quick rise of a cashless and checkless society. in the past, the banking industry and the federal reserve have studied suggestions for the widespread truncation of checks at the bank of first deposit or at an intermediary bank to reduce the costs of the checkcollection system. the results of these studies have been sensitive to assumptions about technology, transition costs, implementation timing, discount rates, and other factors. in addition, assumptions about the storage and retrieval of truncated checks or their images can affect an analysis. most fundamentally, the degree to which banks and the public accept truncation and the associated electronic presentment of checks significantly affects the banking industry's ability to achieve economies of scale and standardization throughout a truncation and electronic collection system. historically, sensitivity to these key assumptions has injected uncertainty into the business case for check truncation and electronic collection. as a result, the banking industry has faced difficult decisions about whether to invest in the truncation of checks or to invest in fully electronic payment technologies, such as the ach or card networks, while encouraging their customers to initiate electronic payments from the beginning of a payment process. to date, the industry has done some of both, with business strategies