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David S. Evans, Richard Schmalensee
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โก Free 3min Summary
Paying with Plastic, second edition - Summary
"Paying with Plastic, second edition" by David S. Evans and Richard Schmalensee offers an in-depth look at the payment card industry, tracing its evolution from the 1950s to the present day. This book is not just a historical account; it provides a comprehensive analysis of the industry's impact on modern commerce. The authors, with over 25 years of research experience, explore the dynamics of two-sided markets, where the value is created only when multiple customer groups are actively engaged. This edition also delves into recent antitrust cases, technological advancements, and the rise of e-commerce, making it a must-read for anyone interested in understanding the complexities of the payment card industry and its future.
Key Ideas
Two-Sided Markets
The book explains the concept of two-sided markets, where the value is generated only when both sidesโcardholders and merchantsโare actively participating. This dynamic is crucial for understanding how payment cards have become so integral to modern commerce, influencing everything from cardholder rewards to merchant fees.
Technological and Business Changes
The authors discuss significant technological and business changes that have shaped the payment card industry. This includes the rise of debit cards, the impact of e-commerce, and the massive consolidation due to bank mergers. These changes have not only altered how transactions are conducted but also how the industry operates on a fundamental level.
Antitrust Implications
"Paying with Plastic" also examines the implications of recent antitrust cases on the payment card industry. These legal battles have had far-reaching effects on how the industry is regulated and how it functions, providing valuable insights into the legal landscape that governs financial transactions.
FAQ's
"Paying with Plastic, second edition" primarily focuses on the evolution and impact of the payment card industry from the 1950s to the present day. It provides a comprehensive analysis of two-sided markets, technological advancements, and recent antitrust cases.
Anyone interested in understanding the complexities of the payment card industry, including its historical development, technological changes, and legal implications, would benefit from reading "Paying with Plastic, second edition." This includes professionals in finance, commerce, and law, as well as academics and students.
The authors, David S. Evans and Richard Schmalensee, bring over 25 years of research experience to "Paying with Plastic, second edition." Their expertise provides valuable insights into the dynamics of two-sided markets, the impact of technological and business changes, and the implications of antitrust cases on the payment card industry.
๐ก Full 15min Summary
The evolution of the payment card industry started in 1950 with a few hundred Diners Club cards and has since grown into a global powerhouse, processing trillions of dollars in transactions every year. This transformation didn't happen overnight. It was a result of four major innovations in payment methods - metallic coins, checks, paper money, and finally, payment cards representing electronic money.
Payment cards really took off in the US, thanks to a fragmented banking system and a heavy reliance on checks. The ingenious combination of payment and financing services in credit cards sparked rapid growth in merchant acceptance and consumer adoption. Payment cards became a staple across all income levels, offering convenience and flexibility. Merchants also benefited from faster transactions and the ability to meet consumer demand.
Now, let's delve into two crucial economic characteristics of the payment card industry. Firstly, it operates as a two-sided platform, requiring participation from both consumers and merchants. Secondly, it involves a unique dynamic called "co-opetition". This means that while there's cooperation on some fronts like technology standards, there's also fierce competition in most aspects of the business.
The industry is filled with major players, including associations like Visa, Mastercard, and American Express, as well as issuers, acquirers, processors, and EFT networks. The competition is intense, with "system wars" between associations, "issuer brawls" for consumers, and "backroom battles" between processors. The industry's structure and practices have also been shaped by antitrust litigation.
As we look to the future, new technologies like smart cards and biometrics could speed up the shift from plastic cards to electronic transactions. Changes within the industry, such as the rise of First Data and deals between banks and associations, could signal a turning point. The most significant shift is the move from physical payment methods to money that is digitally represented and electronically exchanged. This is the future of the payment card industry.
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