per capita basis. for example, we initiate more than 30 billion electronic payments over credit and debit card systems and the ach. and these retail electronic payments have grown by about 10 % per year over the past decade. as a result of these factors, the proportion of checks written compared with the total number of non - cash payments has actually declined from about 80 % in 1990 to around 70 % in 1999. the share of electronic payments increased by a corresponding amount. this is a significant change for an economy as large and diverse as that of the united states. on a per capita basis, credit cards are still the most intensively used form of electronic payments for retail transactions, although the use of debit cards has recently been growing at double - digit rates. furthermore, more than half of workers now receive a direct deposit of their paychecks through the ach. as i noted at the outset, the pace of innovation in the retail payments system has once again picked up. there seems to be a continual stream of announcements about new products and projects, as well as new players and shifting alliances. some of the products are ingenious new ways to make payments over the internet. others aim to automate older payments mechanisms, such as projects to convert checks to electronic payments at the point of sale. the competition among all the different actors has intensified, as they jockey for competitive position in the marketplace. therefore, i put these facts together to conclude that today ’ s trends might give a hint of the contours of tomorrow ’ s world. checks, cash, credit cards and the ach, the established retail payment tools, will all have a place. however, some of the newer electronic payments mechanisms, including internetbased person - to - person and “ c2b ” payments mechanisms, will grow from infancy to greater maturity as well. each of these payments mechanisms will find a niche, and some will break from the pack into general use. challenges for the private sector the major lesson for the private sector is a challenging one, particularly given its limited resources and its imperative to create shareholder value. i believe that the firms that will succeed in the world of retail payments will have to be prepared to invest simultaneously in modernizing the current retail payment systems - giving them a more electronic and automated backbone - while also experimenting with some of the newer payment tools. it appears that many institutions that thought that the check was going to die off now recognize that they must make strides in improving the security and

issues. ultimately, however, each financial institution must decide what is best for that organization, and the federal reserve can serve as a facilitator for discussions, if needed. speaking of the information one might need to create a business case and plan business investment, i feel compelled to note here that we do not really know how many checks are written in the united states each year - information that might be helpful to those interested in automating or replacing check payments. the federal reserve is in the process now of planning to collect data from which to help estimate the annual volume of check payments and their value. we are counting on the assistance of the banking industry in this endeavor. conclusion overall i have a sense that new energy is flowing into efforts to improve the retail payments system. the fact that check, cash and credit cards are likely to be with us for some time should not blind us to the changes that are occurring. i believe that new technology, changes in the banking laws, and old - fashioned competition are producing change. some believe that we may see revolutionary change. several newer retail payment mechanisms will be added to the existing ones, but the history of automating the retail payments system cautions that evolution is more likely than revolution. the federal reserve is actively engaged with the private sector in discussing changes in the payments system. we need to be alert to help remove barriers to innovation, including regulatory barriers, when this is in the public interest. at the same time, new payment arrangements need to address traditional payments system risks in a responsible manner and not wait until problems tarnish innovative thinking. finally, i continue to look for a market - oriented approach to payments system innovation that will provide long - lasting benefits to the consumers and businesses that use the us payments system. true innovations frequently disturb comfortable habits. thus we need to approach payments system innovations with an open mind and a willingness to learn. this is particularly true in the world of electronic commerce, where payments are being adapted to new technologies, products and methods of doing business. these innovations are important in themselves. but they are also important because successful innovations to support electronic commerce may, over the long term, have a broad influence on the payments systems we use throughout our economy.