Bank deregulation is beginning to affect the payment system, opening the door for significant gains in efficiency, according to Federal Reserve Board Chairman Alan Greenspan.

Interstate banking will allow institutions to reduce costs by consolidating their payment processing operations, Mr. Greenspan said at the central bank's Conference on Payment System Risk on Dec. 7.

Costs to consumers also should drop as banks compete nationwide for business, he added.

"There is a renewed sense that significant gains in efficiency in the payment system, including lower costs, greater choice, and reduced float, may be possible," he said.

Mr. Greenspan said he is particularly impressed with the quick rise of point of sale terminals at gas stations and supermarkets. And he noted that automated teller machine cards, checks, credit cards, and debit cards now compete against one another.

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