The evolution of the payments system: a U.S. perspective

In an article adapted from a speech made to at the Annual Conference of the National Bank of Austria in May of this year, Federal Reserve Bank of Kansas City President Hoenig examines recent and prospective changes in the U.S. payments system. The theme of his remarks is that the rate at which a payments system develops depends largely on a struggle between rapid technological change and natural barriers to new product acceptance. This ongoing conflict explains why Americans have seen revolutionary developments in large-dollar payments but only evolutionary developments in small-dollar and retail means of payment.> Mr. Hoenig first examines recent trends in the U.S. payments system. Second, he explores why progress has been so slow in small-dollar and retail payments by examining some of the barriers that have limited payments system progress. Third, he offers his thoughts on how the U.S. system is likely to evolve over time. Finally, he identifies the types of public policy issues the United States is likely to encounter as it moves toward a world of electronic money.