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An Introduction to the Economics of Payment Card Networks

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  • Hunt Robert M.

    ()
    (Research Department, Federal Reserve Bank of Philadelphia)

Abstract

Open payment card networks typically coordinate the activities of thousands of financial institutions that issue cards, millions of retail locations that accept them, and several hundred million consumers that use them. This coordination can include the collective setting of certain prices and other controversial network rules. Such practices have recently come under the scrutiny of antitrust authorities in the U.S. and abroad. This article provides a brief overview of the economics of the payment card industry, explaining some of the differences from the textbook model of competitive markets. Such differences are important factors for the antitrust analysis of payment card networks.

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Bibliographic Info

Article provided by De Gruyter in its journal Review of Network Economics.

Volume (Year): 2 (2003)
Issue (Month): 2 (June)
Pages: 1-17

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Handle: RePEc:bpj:rneart:v:2:y:2003:i:2:n:3

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References

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  1. Graeme Guthrie & Julian Wright, 2003. "Competing Payment Schemes," Departmental Working Papers wp0311, National University of Singapore, Department of Economics.
  2. Gans Joshua S & King Stephen P., 2003. "Approaches to Regulating Interchange Fees in Payment Systems," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-21, June.
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  17. Rochet Jean-Charles, 2003. "The Theory of Interchange Fees: A Synthesis of Recent Contributions," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-28, June.
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Citations

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Cited by:
  1. Wang, Zhu, 2010. "Market structure and payment card pricing: What drives the interchange?," International Journal of Industrial Organization, Elsevier, vol. 28(1), pages 86-98, January.
  2. Randall Wright & Lixin Huang & Ping He, 2008. "Money, Banking, and Monetary Policy," 2008 Meeting Papers 347, Society for Economic Dynamics.
  3. Davide Consoli, 2005. "Changing boundaries and structure of a technological system: lessons from UK retail banking," Development and Comp Systems 0506004, EconWPA.
  4. Hyytinen, Ari & Takalo, Tuomas, 2008. "Consumer awareness and the use of payment media: evidence from young Finnish consumers," Research Discussion Papers 2/2008, Bank of Finland.
  5. Verdier, Marianne, 2006. "Retail Payment Systems: What can we Learn from Two-Sided Markets?," MPRA Paper 2606, University Library of Munich, Germany.
  6. Cyril Monnet & William Roberds, 2006. "Credit and the no-surcharge rule," Working Paper 2006-25, Federal Reserve Bank of Atlanta.
  7. repec:reg:wpaper:105 is not listed on IDEAS
  8. Benjamin Lester & Andrew Postlewaite & Randall Wright, 2008. "Information, Liquidity and Asset Prices," PIER Working Paper Archive 08-039, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  9. Stuart E. Weiner & Julian Wright, 2005. "Interchange fees in various countries: developments and determinants," Payments System Research Working Paper PSR WP 05-01, Federal Reserve Bank of Kansas City.
  10. Monnet, Cyril & Roberds, William, 2008. "Optimal pricing of payment services," Journal of Monetary Economics, Elsevier, vol. 55(8), pages 1428-1440, November.
  11. Kahn, Charles M. & Roberds, William, 2009. "Why pay? An introduction to payments economics," Journal of Financial Intermediation, Elsevier, vol. 18(1), pages 1-23, January.
  12. Bernard M. Hoekman & Niall Meagher, 2013. "China – Electronic Payment Services: Discrimination, Economic Development and the GATS," RSCAS Working Papers 2013/68, European University Institute.
  13. Cyril Monnet & William Roberds, 2007. "Optimal pricing of payment services when cash is an alternative," Working Papers 07-26, Federal Reserve Bank of Philadelphia.
  14. David S. Evans & Richard Schmalensee, 2005. "The economics of interchange fees and their regulation : an overview," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City, issue May, pages 73-120.
  15. Marc Rysman, 2006. "An Empirical Analysis of Payment Card Usage," Boston University - Department of Economics - Working Papers Series WP2006-002, Boston University - Department of Economics.
  16. Davide Consoli, 2005. "Changing boundaries and structure of a technological system: lessons from UK retail banking," Industrial Organization 0506006, EconWPA.
  17. James McAndrews & Zhu Wang, 2012. "The economics of two-sided payment card markets: pricing, adoption and usage," Working Paper 12-06, Federal Reserve Bank of Richmond.
  18. Fumiko Hayashi & Stuart E. Wiener, 2006. "Interchange fees in Australia, the UK, and the United States : matching theory and practice," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 75-112.

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