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Is the debit card revolution finally here?

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Author Info
John P. Caskey
Gordon H. Sellon, Jr.
Abstract

For three decades, experts on payments systems have forecast the imminent arrival of a completely electronic, paperless payment system. In this vision of the future, households, businesses, and government agencies would replace paper transactions with faster, more efficient electronic payments. The centerpiece of this new payment world is the debit card, a magnetically encoded plastic card that would eliminate cash, checks, and even credit cards in most retail transactions.> While some parts of this payment revolution have arrived, in many respects the forecasts have proved to be overly optimistic. The biggest disappointment, thus far, is the debit card. Despite claims of cost savings and greater efficiency, consumers and merchants have been reluctant to switch from traditional payment methods to the debit card.> Caskey and Sellon analyze the factors that have limited the debit card's success and examine prospects for future growth. They find that debit cards are likely to experience strongest growth where consumers find them more convenient than other payment methods, where merchants find them to be cost effective, and where consumers do not have access to a full range of payment alternatives.

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

Volume (Year): (1994)
Issue (Month): Q IV ()
Pages: 79-95
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Handle: RePEc:fip:fedker:y:1994:i:qiv:p:79-95:n:v.79no.4

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Related research
Keywords: Debit cards

Cited by:
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  1. Robert M. Hunt, 2003. "An introduction to the economics of payment card networks," Working Papers 03-10, Federal Reserve Bank of Philadelphia. [Downloadable!]
    Other versions:
  2. Anthony M. Santomero & John J. Seater, 1995. "Alternative Monies and the Demand for Media of Exchange," Center for Financial Institutions Working Papers 96-08, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
    Other versions:
  3. David B. Humphrey, 1996. "The economics of electronic benefit transfer payments," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 77-94. [Downloadable!]
  4. Robert Hunt, 2003. "Antitrust issues in payment card networks: can they do that? should we let them?," Business Review, Federal Reserve Bank of Philadelphia, issue Q2, pages 14-23. [Downloadable!]
  5. 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. [Downloadable!]
  6. William Roberds, 1997. "What's really new about the new forms of retail payment?," Economic Review, Federal Reserve Bank of Atlanta, issue Q 1, pages 32-45. [Downloadable!]
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