Pricing in Retail Payment Systems: A Public Policy Perspective on Pricing of Payment Cards
AbstractThe provision of retail payment services is complex with many participants engaging in a series of interrelated bilateral transactions and subject to large economies of scale and scope along with strong adoption, usage and network externalities. This makes sound public policy difficult. We focus on three types of market interventions for various countries. We argue that intervention into payment markets should concentrate on the removal of entry barriers in payment markets and providing greater incentives to adopt efficient payment instruments without stifling private sector investment in more efficient payment technologies over the long term. While the theoretical literature on the economics of payment cards is growing, the empirical literature is yet too limited to provide much guidance to public authorities. Eventually, the outcomes from different types of market interventions will provide a useful "natural experiment" to refute or validate the various theories of the economics of payments.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 331.
Date of creation: Dec 2011
Date of revision:
Retail payments; market interventions; pricing; public policy;
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-10 (All new papers)
- NEP-BAN-2012-01-10 (Banking)
- NEP-CBA-2012-01-10 (Central Banking)
- NEP-COM-2012-01-10 (Industrial Competition)
- NEP-IND-2012-01-10 (Industrial Organization)
- NEP-NET-2012-01-10 (Network Economics)
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