This magazine is a pretty good metaphor for the immediate future of banking. It's still printed on paper and distributed through traditional channels as an adjunct to the leading daily in the field. Nevertheless, it is composed on computers and its cutting edge graphical design positively glows. It's a safe bet that an on-line version is well advanced, perhaps even being beta-tested as you read this.

Banking is equally schizophrenic. A rush is on to gingerly embrace the latest technology. Smart cards, home pages and digital commerce are phrases more and more commonly being bandied around boardrooms by intensely worried executives who quietly ask their assistants to turn on their computers and print out their e-mail each morning.

Meanwhile, the United States obstinately retains a uniquely paper- based system of banking and commerce and, on the surface, shows little interest in near-term conversion to newer technology. We wrote 65 billion paper checks in 1995. Fed gurus say each one cost the system something like $2.57 to process as opposed to two cents or less if they had been digital transactions. Most of the public, except for current students and recent graduates just weaned from their closed university computer environments, prefer things just as they are today. Bankers are familiar with the status quo, and legions of central bank employees happily stuff Lear Jets full of paper checks each evening in order to fly them about the country in a sort of giant Fed(Reserve)Ex operation.

Still, Americans appear destined to accommodate technology, no matter how reluctantly. That might be Eve's bite mark on the Apple computer logo because we seem to have lost our electronic innocence. Desktop computer technology could turn out to be the mechanism to finally put the skids under paper checks. It is a nervously maintained secret of the industry that today organized criminal gangs are busily scanning corporate and personal checks into computers where they are manipulated and printed out with signatures, magnetic characters and even ink colors that duplicate the originals to a remarkable degree. Combating this increasingly lucrative fraud will mobilize biometrics and imbedded technology to such an extent that we may become prepared to throw up our hands in surrender and say, "Just give me my smart-card-personal-encryption-key and let's get on with it."

Our Domestic and International Monetary Policy Subcommittee will have a hearing on the implications of this form of check fraud/counterfeiting shortly, just as we held four hearings on the "Future of Money" in the last Congress. We will also be examining other issues that are central to the future of banking and electronic commerce in general. One of these will be an inquiry into what should be the federal role in establishing and maintaining a system of electronic authentication that will enable the commerce and banking of the near future.

There are a number of other important basic issues that need to be considered by this Congress, including questions of personal privacy and the privacy right in personal data; Administration policies of limitations on commercial encryption; and what degree of systemic risk might be inherent in new technology. As Bette Davis said in All about Eve,"Fasten your seat belts boys, it's going to be a bumpy ride." n

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