Understanding risk management in emerging retail payments
New technologies used in payment methods can reduce risk, but they can also lead to new risks. Emerging retail payments are prone to operational and fraud risks, especially security breaches and potential use in illicit transactions. This article describes an economic framework for understanding risk control in retail payments. Risk control is a special type of good because it can protect one payment participant without diminishing the protection of other participants. As a result, the authors' economic framework emphasizes risk containment, primarily through the establishment and enforcement of risk management policies. Application of the framework to three types of emerging payments suggests that a payments system can successfully manage risk if it quickly recognizes problems, encourages commitment from all participants to control risk, and uses an appropriate mix of market and public policy mechanisms to align risk management incentives. The authors conclude that providers of emerging payment methods must mitigate risk effectively or face rejection in the payment market.
Volume (Year): (2008)
Issue (Month): Sep ()
|Contact details of provider:|| Postal: 33 Liberty Street, New York, NY 10045-0001|
Web page: http://www.newyorkfed.org/
More information through EDIRC
|Order Information:|| Web: http://www.ny.frb.org/rmaghome/staff_rp/ Email: |
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.:
- Kahn, Charles M. & Roberds, William, 2008.
"Credit and identity theft,"
Journal of Monetary Economics,
Elsevier, vol. 55(2), pages 251-264, March.
- James C. McGrath, 2007. "General-use prepaid cards: the path to gaining mainstream acceptance," Payment Cards Center Discussion Paper 07-03, Federal Reserve Bank of Philadelphia.
- Kenneth N. Kuttner & James J. McAndrews, 2001. "Personal on-line payments," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 35-50.
- Benjamin Hermalin & Michael Katz, 2006. "Privacy, property rights and efficiency: The economics of privacy as secrecy," Quantitative Marketing and Economics (QME), Springer, vol. 4(3), pages 209-239, September.
- Richard J. Sullivan, 2007. "Risk management and nonbank participation in the U.S. retail payments system," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 5-40.
- Jack Hirshleifer, 1983. "From weakest-link to best-shot: The voluntary provision of public goods," Public Choice, Springer, vol. 41(3), pages 371-386, January.
When requesting a correction, please mention this item's handle: RePEc:fip:fednep:y:2008:i:sep:p:137-159:n:v.14no.2. 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: (Amy Farber)
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.