Advanced Search
MyIDEAS: Login to save this paper or follow this series

Competition and innovation in the consumer e-payments market? considering the demand, supply, and public policy issues

Contents:

Author Info

  • Brian Mantel
  • Timothy McHugh

Abstract

Significant debate has occurred over the last several decades regarding whether there is adequate competition and innovation in the non-recurring consumer payments segment of the banking industry. The Department of Justice and some retailers have sued Visa and MasterCard for limiting competition and innovation. There has also been a host of high profile product “failures” in the consumer e-payment market place (e.g., e-cash and smart card products). Meanwhile, some researchers have suggested that consumers are irrational and unresponsive to marketplace incentives (for instance, see Ausubel (1991)). ; Despite anecdotal reports which imply to some that “there’s something wrong” in this market, we find strong, though not yet scientifically conclusive evidence, that there is increasing competition, strong innovation, and customers who respond to market stimuli in the non-recurring consumer payments market. As a result, this paper argues that going forward, public sector involvement in the consumer non-recurring payment market will be less warranted. Based on the analysis of a unique 1,300 person survey, documentation and analysis of recent private sector-led developments, and a Federal Reserve payments benchmarking study, this paper discusses several of the demand-side, supply-side, consumer protection, and competition policy dimensions influencing this market. Four general lessons may be of particular interest to public policy makers and private sector firms.

Download Info

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Bibliographic Info

Paper provided by Federal Reserve Bank of Chicago in its series Occasional Paper; Emerging Payments with number EPS-2001-4.

as in new window
Length:
Date of creation: 2001
Date of revision:
Handle: RePEc:fip:fedhop:eps-2001-4

Contact details of provider:
Postal: P.O. Box 834, 230 South LaSalle Street, Chicago, Illinois 60690-0834
Phone: 312/322-5111
Fax: 312/322-5515
Email:
Web page: http://www.chicagofed.org/
More information through EDIRC

Order Information:
Email:
Web: http://www.chicagofed.org/webpages/publications/print_publication_order_form.cfm

Related research

Keywords: Payment systems ; Electronic commerce;

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Garcia, Gillian, 1980. " Credit Cards: An Interdisciplinary Survey," Journal of Consumer Research, University of Chicago Press, vol. 6(4), pages 327-37, March.
  2. Hirschman, Elizabeth C, 1982. "Consumer Payment Systems: The Relationship of Attribute Structure to Preference and Usage," The Journal of Business, University of Chicago Press, vol. 55(4), pages 531-45, October.
  3. Victor Stango, 2000. "Competition And Pricing In The Credit Card Market," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 499-508, August.
  4. Chakravorti, Sujit, 2004. "Why has stored-value not caught on?," Journal of Financial Transformation, Capco Institute, vol. 12, pages 39-48.
  5. Edward J Green & Robert H Porter, 1997. "Noncooperative Collusion Under Imperfect Price Information," Levine's Working Paper Archive 1147, David K. Levine.
  6. Hancock, Diana & Humphrey, David B., 1997. "Payment transactions, instruments, and systems: A survey," Journal of Banking & Finance, Elsevier, vol. 21(11-12), pages 1573-1624, December.
  7. Ausubel, Lawrence M, 1991. "The Failure of Competition in the Credit Card Market," American Economic Review, American Economic Association, vol. 81(1), pages 50-81, March.
  8. 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.
  9. Sujit Chakravorti & Ted To, 1999. "Toward a theory of merchant credit card acceptance," Working Paper Series WP-99-16, Federal Reserve Bank of Chicago.
  10. 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.
  11. Brian Mantel, 2001. "E-money and e-commerce two alternatives views of future innovations," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Mar.
  12. Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
  13. Carow, Kenneth A. & Staten, Michael E., 1999. "Debit, credit, or cash: survey evidence on gasoline purchases," Journal of Economics and Business, Elsevier, vol. 51(5), pages 409-421, September.
  14. John P. Caskey & Gordon H. Sellon, Jr., 1994. "Is the debit card revolution finally here?," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 79-95.
  15. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
  16. Joanna Stavins, 1996. "Can demand elasticities explain sticky credit card rates?," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 43-54.
  17. Randall S. Kroszner & Philip E. Strahan, 1999. "What Drives Deregulation? Economics And Politics Of The Relaxation Of Bank Branching Restrictions," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1437-1467, November.
  18. Dunkelberg, William C & Smiley, Robert H, 1975. "Subsidies in the Use of Revolving Credit," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 7(4), pages 469-90, November.
  19. Glenn B. Canner & Charles A. Luckett, 1992. "Developments in the pricing of credit card services," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Sep, pages 652-666.
  20. Lave, Charles A, 1985. "Speeding, Coordination, and the 55 MPH Limit," American Economic Review, American Economic Association, vol. 75(5), pages 1159-64, December.
  21. Loretta J. Mester, 2000. "The changing nature of the payments system: should new players mean new rules?," Business Review, Federal Reserve Bank of Philadelphia, issue Mar, pages 3-26.
  22. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May.
  23. Thomas A. Durkin, 2000. "Credit cards: use and consumer attitudes, 1970-2000," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Sep, pages 623-634.
  24. Ann H. Spiotto, 2001. "Credit, debit, or ACH: consequences & liabilities a comparison of the differences in consumer liabilities," Occasional Paper; Emerging Payments EPS-2001-3, Federal Reserve Bank of Chicago.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. W. Scott Frame & Lawrence J. White, 2014. "Technological Change, Financial Innovation, and Diffusion in Banking," Working Papers 14-02, New York University, Leonard N. Stern School of Business, Department of Economics.
  2. Leibbrandt ,Gottfried, 2004. "Harmonizing Europe’s payment systems: an uphill battle?," Research Memorandum 020, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  3. Kari Kemppainen, 2004. "Competition and regulation in European retail payment systems," Microeconomics 0404008, EconWPA.
  4. Joanna Stavins, 2003. "Network externalities in the market for electronic check payments," New England Economic Review, Federal Reserve Bank of Boston, pages 19-30.
  5. J.W.B. Bos & J. Kolari & R. van Lamoen, 2009. "Competition and innovation: evidence from financial services," Working Papers 09-16, Utrecht School of Economics.
  6. W. Scott Frame & Lawrence J. White, 2009. "Technological change, financial innovation, and diffusion in banking," Working Paper 2009-10, Federal Reserve Bank of Atlanta.
  7. W. Scott Frame & Lawrence J. White, 2002. "Empirical studies of financial innovation: lots of talk, little action?," Working Paper 2002-12, Federal Reserve Bank of Atlanta.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:fip:fedhop:eps-2001-4. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bernie Flores).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.