Governance, Issuance Restrictions, and Competition in Payment Card Networks
In: MIT Sloan Research Paper No. 4651-07
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In: MIT Sloan Research Paper No. 4651-07
SSRN
Working paper
In: The Rand journal of economics, Band 43, Heft 4, S. 761-780
ISSN: 1756-2171
I formalize the popular argument that retailers pay too much and cardholders too little to make use of payment card platforms, resulting in excessive use of cards. To do this, I analyze a standard two‐sided market model of a payment card platform. With minimal additional restrictions, the model implies that the privately set fee structure is unambiguously biased against retailers in favor of cardholders, a result that continues to hold even if the platform can perfectly price discriminate on both sides. The market failure arising is primarily a regulatory problem and does not raise any competition concerns.
In: Sindhwani, S and Appasamy, L (2017) Cardpe: Assessing the market potential in a dynamic payments ecosystem in India. Working Paper. Singapore Management University. (Unpublished)
the case follows Sumeet Mehta, CEO of Cardpe Services Private Ltd, a fintech startup established to tap into the gap that existed in the payments acceptance infrastructure in India. Cardpe was all set to launch a mobile Point-of-Sale (mPOS) device – a wireless handheld integrated unit - that processed credit/debit card payments. Cash was a predominant medium of transaction in the country but the government was accelerating digitalisation and promoting measures to move towards a less-cash economy. Measures were underway to bring the largely unbanked public into banking network. Correspondingly, debit and credit card issuance was also growing. However, the availability of point-of-sale (POS) devices that could process credit/debit card payments was inadequate and remained concentrated among large merchants in cities. Due to this shortfall, the use of cards for payments remained low.
BASE
In: American economic review, Band 101, Heft 4, S. 1575-1590
ISSN: 1944-7981
This paper explains why payment card networks charge fees that are proportional to the transaction values instead of charging fixed per-transaction fees. We show that, when card networks and merchants both have market power, card networks earn higher profits by charging proportional fees. It is also shown that competition among merchants reduces card networks' gains from using proportional fees relative to fixed per-transaction fees. Merchants are found to earn lower profits under proportional fees, whereas consumer utility and social welfare are higher. Our welfare results are then evaluated with respect to the current regulatory policy debates. (JEL E42, G21, G28)
In: Mirovaja ėkonomika i meždunarodnye otnošenija: MĖMO, Band 67, Heft 6, S. 124-130
The article is devoted to the problems of the national payment card system (NSPK) development in the conditions of sanctions pressure on Russia. The role of the NSPK in ensuring the national security of the country in the payment sphere is analyzed. The prerequisites for the creation of the NSPK, the history of the sanctions impact on the Russian banking and payment sector are investigated, the features of the implementation of the system are considered and the factors affecting its operation are evaluated. The current state of the system and its place in the Russian payment market are analyzed. Forecasts are made regarding the further development of the NSPK. Recommendations are given to improve the efficiency of the NSPK functioning. The creation of the national payment card system was dictated primarily by the need to ensure Russia's national security in the settlement and payment sphere in the face of unprecedented economic and political pressure from Western countries. Unlike international card payment systems, NSPK was initially focused on working in the domestic market. With the departure of Visa and Mastercard from Russia, the domestic payment system received the status of a monopolist in the country. In addition, one of the priorities was to establish cooperation with foreign partners to increase the number of countries where the NSPK's payment card Mir is accepted, in addition, special attention was paid to the development of co-baging projects. The key advantages of the NSPK: increasing the stability of the payment space functioning, reducing the current costs of making retail non-cash payments, independence from the governments of unfriendly countries and international organizations, ensuring reliable protection of payment information, reducing the turnover of cash and, accordingly, the costs of its provision.
In: Review of Financial Studies, Forthcoming
SSRN
In: NBER working paper series 13218
I discuss the antitrust suit brought by the U.S. Department of Justice against Visa and MasterCard in 1998. Banks that issue Visa cards are free to also issue MasterCard cards, and vice versa, and many banks issue the cards of both networks. However, both Visa and MasterCard had rules prohibiting member banks from also issuing the cards of other networks, in particular American Express and Discover. In addition, most banks are members of both the Visa and MasterCard networks, so governance is to some extent shared. The DOJ claimed that restrictions on issuance and shared governance were anticompetitive and should be prohibited. Visa and MasterCard argued that these practices were procompetitive. The case raised important questions: Given that many banks issue both Visa and MasterCard, and that most merchants that accept one also accept the other, do the two networks really compete, and if so, how? And do Visa and/or MasterCard have market power, if so, in what market, and how is it exercised?
SSRN
In: NBER Working Paper No. w13218
SSRN
Working paper
In: Journal of economics and business, Band 56, Heft 3, S. 211-225
ISSN: 0148-6195
Payment cards cannot be considered as entirely unknown and new phenomenon in the field of financial services. It is one of means to pay without handing cash and already is a commonly used tool in many countries of the world. Ability to reach bank funds online and dispose them there, as well as use the advantages as compared to other means of payment, has done it the mostly usable tool in electronic commerce. The European Union has started conforming regulatory guidelines for electronic payments in the nineth decade of the last century, however, in Lithuania, legal affairs have been started to be observed by these guidelines and their special norms only lately. Establishment of a unitary field of payments in the European Union obliges member states to combine their national legal standards to the legal rules of the European Union. Therefore, the former balance between rights and duties of legal relation participants changes in many member states and other issues of practical nature as related to the Lithuanian national legal deeds contradicting the European Union rules appear. Hence, by limiting ourselves to the European Union and Lithuania, this paper work shall make analysis of the major national rules of the European Union and Lithuania related to the legal issues of payment by cards and the main problems of legal regulation shall be revealed.
BASE
Payment cards cannot be considered as entirely unknown and new phenomenon in the field of financial services. It is one of means to pay without handing cash and already is a commonly used tool in many countries of the world. Ability to reach bank funds online and dispose them there, as well as use the advantages as compared to other means of payment, has done it the mostly usable tool in electronic commerce. The European Union has started conforming regulatory guidelines for electronic payments in the nineth decade of the last century, however, in Lithuania, legal affairs have been started to be observed by these guidelines and their special norms only lately. Establishment of a unitary field of payments in the European Union obliges member states to combine their national legal standards to the legal rules of the European Union. Therefore, the former balance between rights and duties of legal relation participants changes in many member states and other issues of practical nature as related to the Lithuanian national legal deeds contradicting the European Union rules appear. Hence, by limiting ourselves to the European Union and Lithuania, this paper work shall make analysis of the major national rules of the European Union and Lithuania related to the legal issues of payment by cards and the main problems of legal regulation shall be revealed.
BASE
SSRN
Working paper
In: NBER Working Paper No. w22742
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Working paper
In: The journal of hospitality financial management: publ. on behalf of the Association of Hospitality Financial Management Education, Band 16, Heft 2, S. 67-79
ISSN: 2152-2790