fedwire, and chips - - have already substituted electronic transfers for paper checks for many transactions. the recent federal reserve study of retail payments found that americans ’ use of credit cards, debit cards, and other electronic payments have been gaining relative to their use of checks. for example, from 1979 to 2000, while the number of checks written per year increased by 53 percent ( or a 2½ percent compound annual growth rate ), electronic payments increased by 500 percent ( or an 8 percent compound annual growth rate ). as a result, electronic payments accounted for roughly 40 percent of all retail payments other than cash in the united states in 2000 up from 15 percent in 1979. credit card transactions today account for about half the electronic retail payments, and debit cards account for a little more than a quarter, and the remainder is primarily ach payments. these trends are expected to continue. as part of this movement to electronic payments, the federal government encourages recipients to receive benefit payments electronically, and an increasing number of taxpayers are filing electronically. the debt collection improvement act of 1996 required that most federal payments, except for tax refunds, were to be made electronically by 1999. while the “ requirement ” has been eliminated, in fiscal year 2001, 32. 6 percent of federal tax payments were made electronically, and approximately 76 percent of all other treasury disbursements were made electronically, representing more than 900 million payments. today, the federal reserve operates an extensive check clearing system and an electronic automated clearinghouse ( ach ) system, alongside and in competition with private check and electronic clearinghouses. daily the reserve banks receive more than 50 million checks, which they sort on high - speed machines and route to paying banks in the local area and throughout the country. the fed ’ s check - processing operations also electronically capture payment data on all the checks and create digital images of many of the checks. ach payment instructions flow from one bank computer to another via federal reserve computers. the value of these check and ach payments are settled between banks on the fed ’ s books. questions have been raised over the years about the rationale for a direct role for the federal reserve in the retail payment system. in 1996 and 1997, a federal reserve study group, under the direction of alice rivlin, who was then vice chair, considered the future role of the fed in retail payments. after extensive discussions with banking industry representatives, the group concluded that the federal reserve should continue to provide check - clearing and ach

range of goods expands, barter becomes increasingly inconvenient and costly. several considerations have affected the evolution of commodity money itself - - from cattle and grain toward shells and then bronze and ultimately to silver and gold. commodities are useful as a means of payment and store of value if they were are less bulky in relation to their value, more durable, more homogeneous, and more easily verified as to their worth than other commodities. these considerations favored the use of the precious metals, for example, over cattle and grain, encouraged the use of gold and silver rather than bronze and copper, and further affected the way that silver and gold were used as money over time. early commodity money, for example, was weighed, not counted, including the early uses of silver and gold. the introduction of coins that were stamped with their weight and purity allowed money to be counted and again reduced the costs associated with making transactions. silver became the dominant money throughout medieval times into the modern era. relative to silver, copper was too heavy and gold was too light when cast into coins of a size and weight convenient for transactions. the next important evolution was the introduction of “ representative ” paper money. warehouses accepted deposits of silver and gold and issued paper receipts. these paper receipts in turn began to circulate as money, used as a means of payment and held as a store of value. the paper was fully backed by the precious metals in the warehouse. once again, efficiency was enhanced by the convenience of carrying paper money as opposed to the bulkier silver or gold coins. owners of the warehouses soon learned that the holders of the paper receipts would not simultaneously redeem the gold deposited with them. the warehouses could therefore lend the gold - in turn, often converted into paper notes - - holding a reserve of gold that allowed them to meet the normal demands for redemption. this is the beginning of fractional reserve banking. seventeenth - century english goldsmiths are usually credited with this transition to modern banking, though the first paper money was introduced in china in the seventh century, a thousand years before the practice became widespread in europe. paper notes and early banking were introduced in europe in medieval times and further advanced by the great banking families of the renaissance. the spread of paper notes and fractional reserve banking opened up the potential for credit expansion to support economic development but also introduced the possibility of runs and liquidity crises as well as the risk of insolvency through the credit risk associated with the lending. in the nineteenth century,