Resisting Electronic Payment Systems: Burning Down the House?

In the Cleveland Museum of Art hangs a famous painting, The Burning of the Houses of Parliament, by J.M.W. Turner. The painting depicts an event that provides a fascinating case study of the difficulty of changing payments systems in the face of new technology. This difficulty is surfacing again as modern economies face the switch from paperbased payments systems to a variety of electronic systems. The Rivlin Committee called attention to the phenomenon in its 1998 report when it observed that “...the reliance on paper-based retail payment methods is striking in an electronic age.” The report estimates that the percentage of paper makes up 78 percent of all noncash transactions in the United States and only 37 percent in Europe. Why has the United States been so slow to change? Much insight into the reason can be gained by examining the events surrounding the original adoption of paper as a means of public record keeping— events which led to the disastrous fire depicted in Turner’s masterpiece.