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Why has stored value not caught on?

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  • Sujit Chakravorti

Abstract

Why have general-purpose stored-value cards been unsuccessful in penetrating the U.S. market? Three necessary conditions for a payment instrument to be successful are discussed: consumers and merchants need to be convinced of its advantages over existing payment alternatives for at least some types of transactions; payment providers must convince consumers and merchants simultaneously of its benefits to achieve critical mass; and assure them that adequate safety and security measures have been implemented. This article discusses the credit card industry's success in meeting these necessary conditions and stored-value issuers' failure to meet these conditions to date.

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Bibliographic Info

Article provided by Federal Reserve Bank of Chicago in its journal Emerging Issues.

Volume (Year): (2000)
Issue (Month): May ()
Pages:

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Handle: RePEc:fip:fedhei:y:2000:i:may:n:sr-00-6

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Keywords: Smart cards ; Credit cards;

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Cited by:
  1. Brian Mantel, 2000. "Why do consumers pay bills electronically? an empirical analysis," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 32-48.
  2. Cronin, David & McGuinness, Anne, 2010. "Retail Payment Practices. How They Have Evolved in Recent Times and Where They Might Be Going," Quarterly Bulletin Articles, Central Bank of Ireland, pages 56-82, April.
  3. Brian Mantel, 2000. "Why don't consumers use electronic banking products? towards a theory of obstacles, incentives, and opportunities," Occasional Paper; Emerging Payments EPS-2000-1, Federal Reserve Bank of Chicago.
  4. Brian Mantel & Timothy McHugh, 2001. "Competition and innovation in the consumer e-payments market? considering the demand, supply, and public policy issues," Occasional Paper; Emerging Payments EPS-2001-4, Federal Reserve Bank of Chicago.
  5. Carol Clark, 2005. "Shopping without cash: the emergence of the e-purse," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 34-51.
  6. Sujit Chakravorti & Emery Kobor, 2003. "Why invest in payment innovations?," Emerging Issues, Federal Reserve Bank of Chicago, issue Jun.

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