The payments mechanism is gradually becoming completely immersed in the social nervous system. Much technological advancement is directed at reducing the cost of current payment mechanisms such as checks and currency. Magnetic numbers on checks facilitate machine operations. A check can be cleared automatically once the amount has been entered in the computer, if the checks are not returned to the customer. Automatic tellers for transactions and dispensing currency are becoming commonplace. One factor which is inhibiting a more rapid switch to automatic tellers is the cost structure. Banks are charging as much as 1.00 per transaction at automatic tellers and are making no charges for the service of human tellers. The underlying costs are about 10 cents for the electronic approach and 1.45 for the human approach.
Technology has created new services such as Visa and Master Charge. Technology has also created funds transfer systems: CHIPS and Fedfunds. The incentives to use the technology lies in the ability to debit a persons account at the time of purchase. Visa and Master card have a great incentive to do this to reduce float. Stores would eliminate bad checks if payment was instantaneous. To compensate for the loss of float, wages could be paid automatically on a daily or even hourly bases. The switch to an immediate electronic payment system is primarily a matter of standards and a question of the costs and benefits of the investment. The system would have to interface with a wide variety of hardware and software used by banks. An interface standard is required. While the electronic system would be much more efficient, it is a public good. Thus, all will benefit, but individual incentives for its creation are lacking. The move to immediate payment will probably proceed through the expansion of the bank ATM system to include point of sale terminals and by the creation of competing debit credit cards by Visa and Master Charge. For example, here in Austin, customers can purchase gasoline from Diamond Shamrock with their ATM cards. The progress will be gradual and overnight payment will occur long before instantaneous payment occurs.Note that for an automatic clearing mechanism to be desirable for both customers and stores, it would have to be able to reliable process the busiest Christmas shopping day with no more than a ten second delay.
Another trend will be the creation of electronic cash cards which individuals will obtain from their banks. Unlike Visa and Master cards, these bank cash cards provide the customer with anonymity. Anonymous cash cards are opposed by police organizations because they would make it easier for drug pushers to launder money. Entreprenuers are creating several new payment mechanisms on the Internet, which hackers would find very difficult to intercept.