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Is the debit card revolution finally here?

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  • John P. Caskey
  • Gordon H. Sellon

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.

Suggested Citation

  • John P. Caskey & Gordon H. Sellon, 1994. "Is the debit card revolution finally here?," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 79-95.
  • Handle: RePEc:fip:fedker:y:1994:i:qiv:p:79-95:n:v.79no.4
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    File URL: http://www.kansascityfed.org/publicat/econrev/pdf/4q94cask.pdf
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    Citations

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    Cited by:

    1. 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.
    2. David B. Humphrey, 1996. "The economics of electronic benefit transfer payments," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 77-94.
    3. Ali Zaidi, Syed Najaf & Ali, Syed Babar, 2006. "Risk and Scope of Debit Check Card in Competitive Market of Pakistan," MPRA Paper 64456, University Library of Munich, Germany.
    4. 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.
    5. Santomero, Anthony M & Seater, John J, 1996. "Alternative Monies and the Demand for Media of Exchange," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 942-960, November.
    6. repec:rss:jnljms:v5i11p4 is not listed on IDEAS
    7. Hunt Robert M., 2003. "An Introduction to the Economics of Payment Card Networks," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-17, June.
    8. 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.
    9. Amanda King & John King, 2011. "Golden eggs versus plastic eggs: hyperbolic preferences and the persistence of debit," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 35(1), pages 93-103, January.
    10. Robert M. 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.
    11. David Humphrey & Lawrence Pulley & Jukka Vesala, 2000. "The Check's in the Mail: Why the United States Lags in the Adoption of Cost-Saving Electronic Payments," Journal of Financial Services Research, Springer;Western Finance Association, vol. 17(1), pages 17-39, February.
    12. 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.
    13. Nadia Piffaretti, 1998. "A Theoretical Approach to Electronic Money," Macroeconomics 9803005, EconWPA.

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    Keywords

    Debit cards;

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