Competition and innovation in the consumer e-payments market? considering the demand, supply, and public policy issues
Significant debate has occurred over the last several decades regarding whether there is adequate competition and innovation in the non-recurring consumer payments segment of the banking industry. The Department of Justice and some retailers have sued Visa and MasterCard for limiting competition and innovation. There has also been a host of high profile product “failures” in the consumer e-payment market place (e.g., e-cash and smart card products). Meanwhile, some researchers have suggested that consumers are irrational and unresponsive to marketplace incentives (for instance, see Ausubel (1991)). ; Despite anecdotal reports which imply to some that “there’s something wrong” in this market, we find strong, though not yet scientifically conclusive evidence, that there is increasing competition, strong innovation, and customers who respond to market stimuli in the non-recurring consumer payments market. As a result, this paper argues that going forward, public sector involvement in the consumer non-recurring payment market will be less warranted. Based on the analysis of a unique 1,300 person survey, documentation and analysis of recent private sector-led developments, and a Federal Reserve payments benchmarking study, this paper discusses several of the demand-side, supply-side, consumer protection, and competition policy dimensions influencing this market. Four general lessons may be of particular interest to public policy makers and private sector firms.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||2001|
|Date of revision:|
|Contact details of provider:|| Postal: P.O. Box 834, 230 South LaSalle Street, Chicago, Illinois 60690-0834|
Web page: http://www.chicagofed.org/
More information through EDIRC
|Order Information:|| Web: http://www.chicagofed.org/webpages/publications/print_publication_order_form.cfm Email: |
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.:
- 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.
- Glenn B. Canner & Charles A. Luckett, 1992. "Developments in the pricing of credit card services," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Sep, pages 652-666.
- 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.
- 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.
- David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May.
- Ausubel, Lawrence M, 1991. "The Failure of Competition in the Credit Card Market," American Economic Review, American Economic Association, vol. 81(1), pages 50-81, March.
- Thomas A. Durkin, 2000. "Credit cards: use and consumer attitudes, 1970-2000," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Sep, pages 623-634.
- Loretta J. Mester, 2000. "The changing nature of the payments system: should new players mean new rules?," Business Review, Federal Reserve Bank of Philadelphia, issue Mar, pages 3-26.
- Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
- Joanna Stavins, 1996. "Can demand elasticities explain sticky credit card rates?," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 43-54.
- Victor Stango, 2000. "Competition And Pricing In The Credit Card Market," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 499-508, August.
- Lave, Charles A, 1985. "Speeding, Coordination, and the 55 MPH Limit," American Economic Review, American Economic Association, vol. 75(5), pages 1159-64, December.
- Green, Edward J & Porter, Robert H, 1984.
"Noncooperative Collusion under Imperfect Price Information,"
Econometric Society, vol. 52(1), pages 87-100, January.
- Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers 367, California Institute of Technology, Division of the Humanities and Social Sciences.
- Edward J Green & Robert H Porter, 1997. "Noncooperative Collusion Under Imperfect Price Information," Levine's Working Paper Archive 1147, David K. Levine.
- Ann H. Spiotto, 2001. "Credit, debit, or ACH: consequences & liabilities a comparison of the differences in consumer liabilities," Occasional Paper; Emerging Payments EPS-2001-3, Federal Reserve Bank of Chicago.
- Sujit Chakravorti, 2000.
"Why has stored value not caught on?,"
Federal Reserve Bank of Chicago, issue May.
- 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.
- Sujit Chakravorti & Ted To, 1999. "Toward a theory of merchant credit card acceptance," Working Paper Series WP-99-16, Federal Reserve Bank of Chicago.
- Dunkelberg, William C & Smiley, Robert H, 1975. "Subsidies in the Use of Revolving Credit," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 7(4), pages 469-90, November.
- Randall S. Kroszner & Philip E. Strahan, 1999. "What Drives Deregulation? Economics and Politics of the Relaxation of Bank Branching Restrictions," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1437-1467.
- Demsetz, Harold, 1973. "Industry Structure, Market Rivalry, and Public Policy," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 1-9, April.
- Garcia, Gillian, 1980. " Credit Cards: An Interdisciplinary Survey," Journal of Consumer Research, Oxford University Press, vol. 6(4), pages 327-37, March.
- Brian Mantel, 2001. "E-money and e-commerce two alternatives views of future innovations," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Mar.
- 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.
- Hirschman, Elizabeth C, 1982. "Consumer Payment Systems: The Relationship of Attribute Structure to Preference and Usage," The Journal of Business, University of Chicago Press, vol. 55(4), pages 531-45, October.
When requesting a correction, please mention this item's handle: RePEc:fip:fedhop:eps-2001-4. 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: (Bernie Flores)
If references are entirely missing, you can add them using this form.