Paying With Plastic

by Evans, David S.

• ISBN13: 9780262550581
• ISBN10: 026255058X
• Edition: 2nd
• Format: Paperback
• Copyright: 2005-01-30
• Publisher: Mit Pr

Summary

The payment card business has evolved from its inception in the 1950s as a way to handle payment for expense-account lunches (the Diners Club card) into today's complex, sprawling industry that drives trillions of dollars in transaction volume each year. Paying with Plasticis the definitive source on an industry that has revolutionized the way we borrow and spend. More than a history book, Paying with Plasticdelivers an entertaining discussion of the impact of an industry that epitomizes the notion of two-sided markets: those in which two or more customer groups receive value only if all sides are actively engaged. New to this second edition, the two-sided market discussion provides useful insight into the implications of these market dynamics for cardholder rewards, merchant interchange fees, and card acceptance. The authors, both of whom have researched the industry for more than 25 years, also examine the implications of the recent antitrust cases on the industry as well as other business and technological changes -- including the massive consolidation brought about by bank mergers, the rise of the debit card, and the emergence of e-commerce -- that could alter the payment card industry dramatically in the years to come.

Author Biography

David S. Evans is Managing Director of the Global Competition Policy Practice at LECG LLC and part of Market Platform Dynamics, a management consulting firm that focuses on strategic analysis and product design for platform-based firms.

Richard L. Schmalensee is John C. Head III Dean and Professor of Management and Economics at the MIT Sloan School of Management. He is co-editor of Management: Inventing and Delivering Its Future (MIT Press, 2003).

Table of Contents

Preface	xi
Acknowledgments	xv
1 Plastic Cards	1	(24)
The Star	8	(4)
The Main Characters	12	(2)
Other Members of the Cast	14	(4)
Behind the Stage	18	(1)
The Foreign Cast	19	(2)
The Thirteen Acts	21	(4)
2 From Seashells to Electrons	25	(28)
The Evolution of Money	25	(20)
Buy Now, Pay Later	45	(8)
3 More Than Money	53	(34)
Dining on the Cuff	53	(3)
1958	56	(5)
The Birth of Co-opetition	61	(6)
Regulation and Stagflation	67	(8)
The 1980's Spending and Debt Spree	75	(5)
The 1990's and the Rise of the Debit Card	80	(4)
The Golden Anniversary and Beyond	84	(3)
4 From Gourmets to the Masses	87	(28)
The Growth and Diffusion of Payment Cards among U.S. Households	88	(2)
Using Payment Cards to Execute Transactions	90	(5)
Credit Card Lending: Joys, Sorrows, and Controversies	95	(12)
Credit Cards and Entrepreneurship	107	(6)
Room for Growth	113	(2)
5 From Sardi's to Saks.com	115	(18)
Getting to Be Everywhere You Want to Be	116	(3)
Getting Cheaper and Better	119	(7)
Not Everywhere Yet	126	(3)
Paying for Plastic	129	(4)
6 It Takes Two to Tango	133	(26)
Multisided Platform Economics 101	134	(8)
Business Models in Multisided Platform Markets	142	(7)
Multisided Platforms and Price Setting in Payment Cards	149	(10)
7 Co-opetition and the Payment Card Ecosystem	159	(26)
The Co-opetitives	162	(5)
Cooperation, the Tragedy of the Commons, and the Role of Rules	167	(8)
The Co-opetitives, the Go-It-Alones, and Payment Card Ecosystems	175	(10)
8 System Wars	185	(28)
Weapons of War	189	(1)
And They Don't Take American Express	190	(9)
Master the Possibilities	199	(6)
The Card That Is Just Like a Check	205	(8)
9 Issuer Brawls	213	(34)
Who Are the Players?	213	(3)
Product Variety and Market Segmentation	216	(9)
Competitive Strategies	225	(3)
Market Structure	228	(4)
Market Performance	232	(8)
Debit Issuance	240	(7)
10 Backroom Battles	247	(20)
The Evolution of the Payment Processing Business	248	(3)
Who's Who in the Back Room	251	(7)
Market Structure and Performance	258	(9)
11 The Antitrust Wars	267	(30)
Harm to Competitors or Harm to Consumers?	272	(3)
Who's In, Who's Out?	275	(10)
Who Pays for Plastic?	285	(9)
Square Pegs and Round Holes	294	(3)
12 On the Brink	297	(20)
Technologies from the Exotic to the Merely Smart	298	(6)
E-Commerce, E-Payments, and M-Commerce	304	(6)
Shaking up the Marketplace	310	(7)
13 And They Don't Take Cash	317	(4)
Sources and Notes	321	(24)
Selected Bibliography	345	(8)
Index	353