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Meanwhile, fewer checks are in the mail. More than a third of all U.S. workers have their paychecks directly deposited into their bank accounts, compared with 8% in 1988. Almost half of the Federal Government's annual budget is transferred electronically -- to pay the salaries of 1.9 million people (or 86% of its civilian payroll) as well as benefits for war veterans and subsidies for farmers. This year the Internal Revenue Service will send refunds to the bank accounts of 10.5 million taxpayers, 7% more than last year. And in the private sector, computers are now handling 10% of the $50 billion in money transfers between corporations and their suppliers.
So has the cashless era of the philosophers finally arrived? So far, with every advance made by encoded plastic cards and automated billing systems, there have also been glitches or concerns about fraud and privacy. At Chemical Bank, for example, automated teller machines mistakenly deducted a total of $16 million from 100,000 customer accounts in February because of a typographical error in a single line of computer code. The bank bounced 430 checks as a result of the malfunction.
Or consider the problem of fraud, which high-speed computers can unwittingly abet. According to the IRS, the number of fraudulent electronic filings doubled to 26,000 last year, at a cost to the government of nearly $54 million, as computers spat out refunds before IRS examiners could go over the returns. Such incidents have led critics to warn that the rush to automated payment systems is proceeding too fast even for computer experts. "The demands on software are far outpacing the development of software," says Dain Gary, a manager at the Software Engineering Institute at Carnegie-Mellon University.
Small wonder that the advance toward a cashless society has created a new category of frustrated consumers. Hudson Hendren, an engineer in Herndon, Virginia, was mortified last summer when the phone company shut off his service after failing to receive a payment he had made through the ScanFone system. In New York City, hundreds of subway passengers complained last month that the new electronic fare cards were double-charging them for rides or failing to let them through the automated turnstiles. A spokesman for the Metropolitan Transportation Authority blamed the confusion on riders who had not yet learned to use the cards properly and were running them twice through the bar-code reader at the turnstile.
Above all, high-tech payment systems create new problems of privacy even as they increase convenience and efficiency. Maryland became the first state to provide debit cards for welfare clients last year when it issued its "Independence Card" to 170,000 households that received public aid. The cards enable recipients to shop at supermarkets such as Giant and Safeway as well as at 3,500 other stores around the state; families on welfare can also use the cards to withdraw cash from ATM machines and to pay utility bills and rent for public housing. Among other benefits, these cards have virtually eliminated the expense of preparing and distributing welfare checks.