channels of data communication with existing and potential customers and business partners through the internet. in this world, particularly in retail commerce, payments by paper have been the exception, not the rule. despite ongoing discussions about privacy and security in electronic commerce, credit cards have rapidly become the payment instrument of choice for consumers. interestingly, there have been experiments with new payment systems analogous to private currency. to date, these products have not been widely successful, despite the fact that some have offered significant degrees of privacy and security. instead, familiarity with and confidence in the credit card built up over more than half a century of use seem for now to have shaped behavior. some suppliers have sought to deepen confidence by voluntarily expanding consumer protections. in a twist of history, even gold coins can now be purchased on line with a credit card. experiments are also taking place to facilitate the use of debit cards in on - line transactions. the use of such instruments would clearly expand electronic payment capabilities over the internet to those with bank accounts who do not hold credit cards. experiments with technologies such as electronic money that do not even require bank accounts may yet find a role to play. new arrangements are also being tried that would mimic the flexibility of the check in making payments in diverse on - line transactions ranging from ad hoc person - to - person payments to routine business - to - business purchases. regarding the older electronic payment systems such as the automated clearinghouse ( ach ), both suppliers of payment services and the end users are continuing to look for new ways to build on the interbank processing efficiencies that these systems offer. one of the great ironies is that studies in the 1960s and 1970s led to recommendations that it would be more economical for society to build whole new electronic payment systems such as the ach than to adopt check - truncation technologies. although the ach has been extremely effective for automating some types of transactions, it has not been as widely used as originally anticipated. one of the problems has apparently been the relative lack of flexible and low - cost interfaces with consumers and with business systems similar to those that have been built up around the check. now, however, a range of experiments and businesses are building on the ach, and potentially on other electronic payment networks. in a revival of the idea of check truncation, projects have gone forward to truncate checks at the point of sale, as well as at lockbox locations, and to substitute ach payments. these

money - our store of value and medium of exchange - takes than we payments system specialists have readily understood. it took many generations for people to feel comfortable accepting paper in lieu of gold or silver. it is taking almost as long to convince them that holding money and making payments in ephemeral electronic form is as secure as using paper. there is, of course, more to the tenacity of paper than a deep psychological connection between money and tangible wealth. paper instruments also are perceived to have a greater degree of privacy than electronic payments, although there have been experiments with electronic money and other instruments that would provide relatively high levels of privacy. but confidence in such arrangements may take quite awhile to emerge. currency, and to a large degree checks, are currently perceived to offer significant advantages in privacy over electronic payment systems that entail centrally maintained databases with elaborate records of individual transactions. perhaps an even more important dimension influencing our behavior regarding money and payments is convenience. currency and checks do not require the users to travel to special locations, dial the number of a special machine, or maintain special equipment to originate payments. this is not to deny that automation has played an important role in reducing risks and increasing efficiency in handling currency and checks. rather, the issue is that traditional paper instruments allow the users themselves, within a structured format, to have significant control over when, where, and how to make payments. turning to the suppliers of payment instruments and services, we see that many are straddling two different worlds. the world of paper is well known and a major part of the business of traditional financial institutions. the world of electronic commerce is a new and growing part of business that is changing daily and operating on a different time scale. the phrase “ internet time ” has now been added to our vocabulary. behind this phrase is a serious observation that advances in information technology allow new ideas to be transformed into products and services much more rapidly than a few years ago, thus greatly speeding up product cycles. at the same time, new information technologies have broken down barriers between firms and stimulated very creative and competitive processes across the economy. some traditional financial institutions have tended to view this process with concern. as many firms have driven to find new ways to supply financial and other kinds of information, along with transactions and accounting services, some have expressed concern that their traditional payment franchise is being eroded. this concern is another manifestation of the insecurity brought on by innovation and change. many firms, including financial firms, have now opened