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Identifying the attribute of joint demand in Chinese payment card market

Author

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  • Lianying Fu
  • Pinliang Luo
  • Ling Rong

Abstract

Payment card market is characterised by its two-sidedness. This fact implies that the demand of the market is jointly determined by participants on both sides of the payment platform. In this article, we employ copula functions to capture the complex relationship between the marginal demands from cardholders and merchants in payment card market. Moreover, we estimate the distribution function of the joint demand in Chinese payment card market, and find that the t copula function fits the demand relationship between the issuing market and the acquiring market well. Our findings show that the joint demand in Chinese payment card market increases with the demand from issuing market, while it is not influenced by the demand from acquiring market. This pattern is due to the distorted profit distribution system in Chinese payment card market. We argue that the pattern of overvaluing issuing market but undervaluing acquiring market is unsustainable, and a further reform in Chinese payment card market is definitely necessary.

Suggested Citation

  • Lianying Fu & Pinliang Luo & Ling Rong, 2012. "Identifying the attribute of joint demand in Chinese payment card market," International Journal of Electronic Finance, Inderscience Enterprises Ltd, vol. 6(3/4), pages 239-255.
    • Handle: RePEc:ids:ijelfi:v:6:y:2012:i:3/4:p:239-255
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