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What's really new about the new forms of retail payment?

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  • William Roberds

Abstract

Rapid developments in technology have brought about new methods of retail payment-such as remote banking, electronic cash, and debit, stored-value, and smart cards-that were unavailable a decade ago. Some observers believe that these alternative payment methods will differ from traditional methods not only in a technological but also in an economic sense and will alter how consumers and businesses interact. ; This article examines the question of whether, from the standpoint of economic theory, there is or will likely be anything new about these new forms of payment. The author describes some of the conflicts of interest that confront all types of payment systems in market economies. He then considers why traditional forms of payment, such as checks and banknotes, represent reasonable solutions to these conflicts of interest and outlines some shortcomings of the traditional forms. The article also analyzes the economic characteristics of the new forms of payment and explains why they differ little and in some cases not at all from more traditional forms. Finally, the author concludes that the same policy issues that apply to the creation of checkable deposits and to the issue of banknotes should apply to the creation of the new forms of liabilities.

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Bibliographic Info

Article provided by Federal Reserve Bank of Atlanta in its journal Economic Review.

Volume (Year): (1997)
Issue (Month): Q 1 ()
Pages: 32-45

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Handle: RePEc:fip:fedaer:y:1997:i:q1:p:32-45:n:v.82no.1

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Related research

Keywords: Debit cards ; Smart cards;

References

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  1. Champ, B. & Smith, B.D., 1991. "Currency Elasticity and Banking Panics: theory and Evidence," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9109, University of Western Ontario, The Centre for the Study of International Economic Relations.
  2. Woodford, Michael, 1990. "The optimum quantity of money," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 20, pages 1067-1152 Elsevier.
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  9. James N. Duprey & Clarence W. Nelson, 1986. "A visible hand: the Fed's involvement in the check payments system," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 18-29.
  10. Townsend, Robert M, 1989. "Currency and Credit in a Private Information Economy," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1323-44, December.
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  12. Diamond, Douglas W, 1991. "Debt Maturity Structure and Liquidity Risk," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 709-37, August.
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  15. Timberlake, Richard H., 1993. "Monetary Policy in the United States," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226803845.
  16. James McAndrews, 1997. "Banking and payment system stability in an electronic money world," Working Papers 97-9, Federal Reserve Bank of Philadelphia.
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Cited by:
  1. Nadia Piffaretti, 1998. "A Theoretical Approach to Electronic Money," Macroeconomics 9803005, EconWPA.

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