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Economics of payment cards: a status report

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  • Wilko Bolt
  • Sujit Chakravorti

Abstract

This article surveys the recent theoretical literature on payment cards (focusing on debit and credit cards) and studies this research's possible implications for the current public policy debate over payment card networks and the pricing of their services for both consumers and merchants.

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Bibliographic Info

Article provided by Federal Reserve Bank of Chicago in its journal Economic Perspectives.

Volume (Year): (2008)
Issue (Month): Q IV ()
Pages: 15-27

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Handle: RePEc:fip:fedhep:y:2008:i:qiv:p:15-27:n:v.32no.4

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Related research

Keywords: Payment systems ; Credit cards;

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References

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  1. Jullien, Bruno, 2000. "Competing in Network Industries: Divide and Conquer," IDEI Working Papers 112, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jul 2001.
  2. Schmalensee, Richard, 2002. "Payment Systems and Interchange Fees," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 103-22, June.
  3. Wilko Bolt & Nicole Jonker & Corry van Renselaar, 2008. "Incentives at the counter: An empirical analysis of surcharging card payment and payment behaviour in the Netherlands," DNB Working Papers 196, Netherlands Central Bank, Research Department.
  4. Daniel D. Garcia-Swartz & Robert W. Hahn & Anne Layne-Farrar, 2006. "The Move Toward a Cashless Society: A Closer Look at Payment Instrument Economics," Review of Network Economics, De Gruyter, vol. 5(2), pages 1.
  5. Mark Armstrong, 2006. "Competition in two‐sided markets," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 668-691, 09.
  6. Sujit Chakravorti & Roberto Roson, 2004. "Platform competition in two-sided markets: the case of payment networks," Working Paper Series WP-04-09, Federal Reserve Bank of Chicago.
  7. Christine Beijnen & Wilko Bolt, 2008. "Size Matters: Economies of Scale in European Payment Processing," FIW Working Paper series 013, FIW.
  8. Wilko Bolt, 2008. "The European Commission's Ruling in MasterCard : A Wise Decision?," Antitrust Chronicle, Competition Policy International, vol. 4.
  9. Wilko Bolt & David Humphrey & Roland Uittenbogaard, 2008. "Transaction Pricing and the Adoption of Electronic Payments: A Cross-Country Comparison," International Journal of Central Banking, International Journal of Central Banking, vol. 4(1), pages 89-123, March.
  10. repec:rne:rneart:v:5:y:2006:i:2:p:175-198 is not listed on IDEAS
  11. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-28, Summer.
  12. Marius Schwartz & Daniel R. Vincent, 2006. "The No Surcharge Rule and Card User Rebates: Vertical Control by a Payment Network," Review of Network Economics, De Gruyter, vol. 5(1), pages 6.
  13. Graeme Guthrie & Julian Wright, 2003. "Competing Payment Schemes," Departmental Working Papers wp0311, National University of Singapore, Department of Economics.
  14. Hans Brits & Carlo Winder, 2005. "Payments are no free lunch," DNB Occasional Studies 302, Netherlands Central Bank, Research Department.
  15. James McAndrews & Zhu Wang, 2007. "Microfoundations of Two-sided Markets: The Payment Card Example," DNB Working Papers 128, Netherlands Central Bank, Research Department.
  16. 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.
  17. Bolt, Wilko & Tieman, Alexander F., 2008. "Heavily skewed pricing in two-sided markets," International Journal of Industrial Organization, Elsevier, vol. 26(5), pages 1250-1255, September.
  18. Rochet, Jean-Charles & Tirole, Jean, 2006. "Two-Sided Markets: A Progress Report," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
  19. Sujit Chakravorti & William R. Emmons, 2001. "Who pays for credit cards?," Occasional Paper; Emerging Payments EPS-2001-1, Federal Reserve Bank of Chicago.
  20. Gene Amromin & Sujit Chakravorti, 2009. "Whither Loose Change? The Diminishing Demand for Small-Denomination Currency," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(2-3), pages 315-335, 03.
  21. Sujit Chakravorti & Victor Lubasi, 2006. "Payment instrument choice: the case of prepaid cards," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q II, pages 29-43.
  22. Julian Wright, 2001. "The Determinants of Optimal Interchange Fees in Payment Systems," Industrial Organization 0108001, EconWPA.
  23. Wilko Bolt & David Humphrey, 2007. "Payment Network Scale Economies, SEPA, and Cash Replacement," Review of Network Economics, De Gruyter, vol. 6(4), pages 2.
  24. Wilko Bolt & Sujit Chakravorti, 2008. "Consumer choice and merchant acceptance of payment media," Working Paper Series WP-08-11, Federal Reserve Bank of Chicago.
  25. Chakravorti, Sujit & To, Ted, 2007. "A theory of credit cards," International Journal of Industrial Organization, Elsevier, vol. 25(3), pages 583-595, June.
  26. Humphrey, David B & Kim, Moshe & Vale, Bent, 2001. "Realizing the Gains from Electronic Payments: Costs, Pricing, and Payment Choice," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 216-34, May.
  27. Zhu Wang, 2008. "Market structure and credit card pricing: what drives the interchange?," Payments System Research Working Paper PSR WP 06-04, Federal Reserve Bank of Kansas City.
  28. Humphrey, David & Willesson, Magnus & Bergendahl, Goran & Lindblom, Ted, 2006. "Benefits from a changing payment technology in European banking," Journal of Banking & Finance, Elsevier, vol. 30(6), pages 1631-1652, June.
  29. Terri Bradford, 2008. "Developments in interchange fees in the United States and abroad," Payments System Research Briefing, Federal Reserve Bank of Kansas City, issue Apr.
  30. JOHN M. Barron & MICHAEL E. Staten & JOHN Umbeck, 1992. "Discounts For Cash In Retail Gasoline Marketing," Contemporary Economic Policy, Western Economic Association International, vol. 10(4), pages 89-102, October.
  31. Joshua S. Gans & Stephen P. King, 2003. "The Neutrality of Interchange Fees in Payment Systems," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 0(1), pages 1.
  32. Jean-Charles Rochet, 2003. "The Theory of Interchange Fees: A Synthesis of Recent Contributions," Review of Network Economics, De Gruyter, vol. 2(2), pages 4.
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Citations

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Cited by:
  1. Nicole Jonker, 2011. "Card acceptance and surcharging: the role of costs and competition," DNB Working Papers 300, Netherlands Central Bank, Research Department.
  2. Santiago Carbó-Valverde & Sujit Chakravorti & Francisco Rodríguez Fernández, 2009. "Regulating two-sided markets: an empirical investigation," Working Paper Series 1137, European Central Bank.
  3. Wilko Bolt & Heiko Schmiedel, 2009. "SEPA, efficiency, and payment card competition," Working Paper Series 1140, European Central Bank.
  4. Wilko Bolt & Sujit Chakravorti, 2011. "Pricing in Retail Payment Systems: A Public Policy Perspective on Pricing of Payment Cards," DNB Working Papers 331, Netherlands Central Bank, Research Department.
  5. Oz Shy, 2011. "A Short Survey of Network Economics," Review of Industrial Organization, Springer, vol. 38(2), pages 119-149, March.
  6. Langlet, Markus, 2011. "Payment Card Network Pricing - A Theoretical Approach Analyzing the Relationship between Downstream Market Characteristics and the Merchant Usage Fee," EconStor Theses, ZBW - German National Library of Economics, number 44593.
  7. Biliana Alexandrova-Kabadjova & Sara Gabriela Castellanos Pascacio & Alma L. García-Almanza, 2012. "The Adoption Process of Payment Cards -An Agent- Based Approach," Working Papers 2012-02, Banco de México.
  8. Biliana Alexandrova-Kabadjova & Sara G. Castellanos Pascacio & Sara G. Castellanos Pascacio & Alma L. Garcia-Almanza, 2012. "The Adoption Process of Payment Cards. An Agent-Based Approach," Working Papers 1213, BBVA Bank, Economic Research Department.
  9. Fabio M. Manenti & Ernesto Somma, 2011. "Plastic Clashes: Competition Among Closed And Open Payment Systems," Manchester School, University of Manchester, vol. 79(6), pages 1099-1125, December.
  10. Biliana Alexandrova-Kabadjova & Sara G. Castellanos Pascacio & Sara G. Castellanos Pascacio & Alma L. Garcia-Almanza, 2012. "El proceso de adopcion de tarjetas de pago. Un enfoque basado en agentes," Working Papers 1214, BBVA Bank, Economic Research Department.
  11. Nicholas Economides & David Henriques, 2011. "To surcharge or not to surcharge? A two-sided market perspective of the no-surchage rule," Working Paper Series 1388, European Central Bank.
  12. Biliana Alexandrova-Kabadjova & José Luis Negrín, 2009. "What drives the network’s growth? An agent-based study of the payment card market," Working Paper Series 1143, European Central Bank.
  13. Wilko Bolt & Sujit Chakravorti, 2010. "Digitization of Retail Payment," DNB Working Papers 270, Netherlands Central Bank, Research Department.

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