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Why has stored value not caught on?

Author

Listed:
  • Sujit Chakravorti

Abstract

Why have general-purpose stored-value cards been unsuccessful in penetrating the U.S. market? Three necessary conditions for a payment instrument to be successful are discussed: consumers and merchants need to be convinced of its advantages over existing payment alternatives for at least some types of transactions; payment providers must convince consumers and merchants simultaneously of its benefits to achieve critical mass; and assure them that adequate safety and security measures have been implemented. This article discusses the credit card industry's success in meeting these necessary conditions and stored-value issuers' failure to meet these conditions to date.

Suggested Citation

  • Sujit Chakravorti, 2000. "Why has stored value not caught on?," Emerging Issues, Federal Reserve Bank of Chicago, issue May.
  • Handle: RePEc:fip:fedhei:y:2000:i:may:n:sr-00-6
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    Cited by:

    1. Sujit Chakravorti & Emery Kobor, 2003. "Why invest in payment innovations?," Emerging Issues, Federal Reserve Bank of Chicago, issue Jun.
    2. 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.
    3. Carol L. Clark, 2005. "Shopping without cash: the emergence of the e-purse," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 34-51.
    4. 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.
    5. Cronin, David & McGuinness, Anne, 2010. "Retail Payment Practices. How They Have Evolved in Recent Times and Where They Might Be Going," Quarterly Bulletin Articles, Central Bank of Ireland, pages 56-82, April.
    6. 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.

    More about this item

    Keywords

    Smart cards ; Credit cards;

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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