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An introduction to the economics of payment card networks

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  • Robert M. Hunt

Abstract

Open payment card networks typically coordinate the activities of thousands of financial institutions that issue cards, millions of retail locations that accept them, and several hundred million consumers that use them. This coordination can include the collective setting of certain prices and other controversial network rules. Such practices have recently come under the scrutiny of antitrust authorities in the U.S. and abroad. This paper provides a brief overview of the economics of the payment card industry, explaining some of the differences from the textbook model of competitive markets. Such differences are important factors for the antitrust analysis of payment card networks. ; Also issued as Payment Cards Center Discussion Paper No. 03-08

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Bibliographic Info

Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 03-10.

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Date of creation: 2003
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Publication status: Published in Review of Network Economics, June 2003, pp 80-96
Handle: RePEc:fip:fedpwp:03-10

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Keywords: Payment systems;

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Citations

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Cited by:
  1. Hyytinen, Ari & Takalo, Tuomas, 2008. "Consumer awareness and the use of payment media: evidence from young Finnish consumers," Research Discussion Papers 2/2008, Bank of Finland.
  2. Cyril Monnet & William Roberds, 2007. "Optimal pricing of payment services when cash is an alternative," Working Papers 07-26, Federal Reserve Bank of Philadelphia.
  3. Kahn, Charles M. & Roberds, William, 2009. "Why pay? An introduction to payments economics," Journal of Financial Intermediation, Elsevier, vol. 18(1), pages 1-23, January.
  4. Weiner Stuart E. & Wright Julian, 2005. "Interchange Fees in Various Countries: Developments and Determinants," Review of Network Economics, De Gruyter, vol. 4(4), pages 1-34, December.
  5. Evans, David & Schmalensee, Richard, 2005. "The Economics of Interchange Fees and Their Regulation: An Overview," Working papers 18181, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  6. Davide Consoli, 2005. "Changing boundaries and structure of a technological system: lessons from UK retail banking," Development and Comp Systems 0506004, EconWPA.
  7. Wang, Zhu, 2010. "Market structure and payment card pricing: What drives the interchange?," International Journal of Industrial Organization, Elsevier, vol. 28(1), pages 86-98, January.
  8. Cyril Monnet & William Roberds, 2006. "Credit and the no-surcharge rule," Working Paper 2006-25, Federal Reserve Bank of Atlanta.
  9. Bernard M. Hoekman & Niall Meagher, 2013. "China – Electronic Payment Services: Discrimination, Economic Development and the GATS," RSCAS Working Papers 2013/68, European University Institute.
  10. Monnet, Cyril & Roberds, William, 2008. "Optimal pricing of payment services," Journal of Monetary Economics, Elsevier, vol. 55(8), pages 1428-1440, November.
  11. James McAndrews & Zhu Wang, 2012. "The economics of two-sided payment card markets: pricing, adoption and usage," Working Paper 12-06, Federal Reserve Bank of Richmond.
  12. Randall Wright & Lixin Huang & Ping He, 2008. "Money, Banking, and Monetary Policy," 2008 Meeting Papers 347, Society for Economic Dynamics.
  13. Benjamin Lester & Andrew Postlewaite & Randall Wright, 2008. "Information, Liquidity and Asset Prices," PIER Working Paper Archive 08-039, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  14. Marc Rysman, 2006. "An Empirical Analysis of Payment Card Usage," Boston University - Department of Economics - Working Papers Series WP2006-002, Boston University - Department of Economics.
  15. Fumiko Hayashi & Stuart E. Wiener, 2006. "Interchange fees in Australia, the UK, and the United States : matching theory and practice," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 75-112.
  16. Davide Consoli, 2005. "Changing boundaries and structure of a technological system: lessons from UK retail banking," Industrial Organization 0506006, EconWPA.
  17. Verdier, Marianne, 2006. "Retail Payment Systems: What can we Learn from Two-Sided Markets?," MPRA Paper 2606, University Library of Munich, Germany.

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