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Finance History: Electronic Money Transfers

About the prospect of electronic money transfers written at at time when banks, accounts, and credit cards were processed through paper work.

ELECTRONIC MONEY TRANSFER:

A FUTURE REALITY?

Cash payments have been replaced by credit cards and payment by check. However, the paper work involved in the processing of checks is costly, running the banking industry billions of dollars a year. Elimination of this expense depends on elimination of the check and the credit card. Before such a drastic change can occur, a new system of money transfer is needed to replace the old one. Electronic money transfer is the answer, and it is now being developed. It is a system totally run by computer. In it each individual is the holder of a single national credit card which can provide him with all necessary goods and services. The desirability of this method is highly controversial, due particularly to the computer and the "controls" it will bring.

Dependence upon the computer is already evident in our credit-card society. Computer banks record and evaluate a consumer's past credit history, his current credit status and "capability" to pay, and even his character. In the U.S. there are over 2,500 credit bureaus. Somewhere in the records of these bureaus there is a file on every American who has applied for credit. In his book, Credit Cardsmanship, Martin J. Meyer states that the information contained in the files "is sometimes so private that the FBI is now buying 25,000 credit reports a year." Meyer also points out that there is no legislation to prevent computer "linkups" and that "already 25 States exchange computerized tax data with the Internal Revenue Service."

"Invasion of privacy" complaints have been voiced due to the massive amounts of information being recorded on computers. Former Senator Sam J. Ervin, Jr. (Dem.-N.C.), has said that existing computer files in Washington are leading the country toward a "police state." Ralph Nader says, "Invisible changes are taking place everywhere. We feel them every minute of every day and they are having cataclysmic overtones as to how we operate this society. This is leading to a significant kind of tyranny. The key democratic principle of man's control over his life is being abused. Unless we do something about it, we're suddenly going to wake up a nation of slaves."

Are Americans en route to the system of electronic money transfer? The Federal Reserve Board says that credit cards are "a step toward ... electronic money transfer" and "an interim and useful phase in the evolution of ... the checkless society."

FOR FURTHER READING

Meyer, Martin J. Credit Cardsmanship. New York, Farnsworth Publishing Co., Inc., 1971. An in-depth probe into a cashless system versus a cash and credit economy:

Hendrickson, Robert. The Cashless Society.

New York, Dodd, Mead & Co., 1972.

A detailed look at how to play the credit-card game--how you can make money, save money, or lose it.

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