Paying with Plastic : The Digital Revolution in Buying and Borrowing

by David S. Evans; Richard Schmalensee

• ISBN13: 9780262050623
• ISBN10: 0262050625
• Format: Hardcover
• Copyright: 1999-11-01
• Publisher: Mit Pr

Summary

Since Diners Club issued its first charge cards in 1950, payment cards -- credit, debit, and charge cards -- have revolutionized how and whenwe pay for goods and services. In Paying with Plastic, David Evans and Richard Schmalensee provide a nontechnical distillation of their years of research on the economic, technological, and institutional forces that have shaped the payment card industry. They show how competition works in an industry that does not neatly fit any of the standard economic models. They describe how the payment card companies such as MasterCard and Visa have developed complex systems for coordinating transactions among their thousands of bank members and millions of cardholders and accepting merchants. Evans and Schmalensee also describe recent developments in the industry and consider its likely evolution.

Author Biography

David Evans is Senior Vice President of National Economics Research Associates, Inc. Richard Schmalensee is Dean of the Sloan School of Management and the Gordon Y. Billard Professor of Management and Economics at the Massachusetts Institute of Technology.

Table of Contents

Preface	xi
Acknowledgments	xiii
Plastic Cards	1	(18)
The Star	7	(1)
Star Performance	7	(3)
The Main Characters	10	(1)
Other Members of the Cast	11	(2)
Supporting Roles	13	(1)
The Foreign Cast	14	(1)
The Thirteen Acts	15	(4)
From Sea Shells to Electrons	19	(18)
What Is Money?	19	(3)
Money in America	22	(3)
Cash, Check, or Charge?	25	(1)
Debit or Credit?	26	(4)
The Role of Payment Cards in the U.S. Economy	30	(7)
A Land of Local Banks, Awash in Paper Checks	37	(24)
Banking in America	38	(9)
Banks, Nonbanks, and Payment Cards	47	(14)
The Rise of Payment Cards	61	(24)
Diners Club and the Birth of the Payment Card	62	(3)
The Infancy of the Card Associations	65	(4)
Early Policy Issues: Duality and Usury	69	(4)
The 1980s Spending and Debt Spree	73	(2)
The 1990s and the New Millenium	75	(2)
Risk, Innovation, and Investment	77	(8)
From Gourmets to the Masses	85	(26)
The Growth and Diffusion of Credit Cards in the American Economy	86	(5)
Payment Cards and the Transactions Demand for Money	91	(3)
Credit Cards and Liquidity Constraints	94	(6)
Credit Cards and Entrepreneurship	100	(7)
But Are Payment Cards Really a Good Deal?	107	(4)
Everywhere You Want to Be, Not Everywhere They Want to Be	111	(26)
Who Are the Players?	112	(7)
Honor All Cards	119	(2)
The Economics of Merchant Acceptance	121	(6)
More and More Merchants Take Payment Cards	127	(10)
Chickens, Eggs, and Other Economic Conundrums	137	(32)
Product Differentiation	138	(11)
Economics of Network Industries	149	(4)
Some Economics of Joint Ventures	153	(10)
Interdependent Pricing	163	(6)
System Wars	169	(38)
Who Are the Warriors?	173	(2)
The Weapons of War	175	(2)
The Rise and Decline of American Express Cards	177	(16)
The Bankcard Battles	193	(14)
Issuer Brawls	207	(40)
Who Are the Players?	207	(3)
Product Differentiation and Market Segmentation	210	(6)
Competitive Strategies	216	(8)
Market Structure	224	(11)
Market Performance	235	(9)
Consolidation in Banking and Cards	244	(3)
Puzzles and Paradoxes	247	(16)
High and Sticky Interest Rates	248	(3)
The Myth of Exorbitant Profits	251	(6)
AT&T, GM, and Credit Card Prices	257	(6)
The Antitrust Wars	263	(34)
Sleeping with the Enemy: Worthen	267	(8)
Good Fix: NaBanco	275	(6)
Someone's Knocking at My Door: Mountain West	281	(7)
Leveling the Battlefield	288	(9)
Debit Takes Off (Finally)	297	(24)
Awkward Growth, Complexity, and Confusion	297	(5)
The Rise of ATMs	302	(4)
The Growth of PIN Pad Merchants	306	(4)
The Associations Finally Get It Right	310	(5)
Which Came First?	315	(2)
The Future of Debit Cards	317	(4)
And They Don't Take Cash	321	(6)
Sources and Notes	327	(22)
Selected Bibliography	349	(12)
Index	361