The Magic of Plastic Cards: The Digital Revolution of Transactions: The Digital Revolution of Transactions

Author: David S. Evans
Publisher:
Publication Date: 2004-03-01
Features: This highly readable book will not only attract policymakers and business managers but also economists inclined toward theoretical research. Evans and Schmalensee provide a rigorous analysis and offer profound insights into the highly attractive institutional characteristics of the credit card industry. The Plastic Card Industry: The Digital Revolution of Transactions significantly expands our knowledge horizon and is an outstanding achievement. Throughout history, there have been four major transformations in payment methods: metal currency in ancient societies, bills in the Middle Ages, paper money in modern societies, and current payment cards. Since the Diners Club issued its first charge card in 1950, payment cards—including credit cards, debit cards, and charge cards—have changed the way and time we pay for goods and services. In 1998, American consumers held over 7.2 billion payment cards, enabling them to purchase goods and services at 4 million stores in the U.S. and 11 million stores in other countries. David S. Evans and Richard Schmalensee have dedicated years to researching the economic, technological, and institutional factors shaping the payment card industry. This book contains the non-technical essence of their research findings. The authors reveal how firms compete in an industry that does not fully fit any standard economic model. They describe how businesses in this industry solve the "chicken-and-egg" problem: if few consumers use payment cards, merchants will not accept them; similarly, if few merchants accept payment cards, consumers will not use them. The authors also describe how payment card organizations like MasterCard and Visa develop comprehensive systems to coordinate transactions among thousands of bank members and millions of cardholders and merchants. The authors introduce new developments in the payment card industry in this book and offer their perspectives on potential changes in the industry.