This paper provides a new theory for two-sided payment card markets. Adopting payment cards requires consumers and merchants to pay a fixed cost, but yields a lower marginal cost of making payments. Analyzing adoption and usage externalities among heterogeneous consumers and merchants, our theory derives the equilibrium card adoption and usage pattern consistent with empirical evidence. Our ana...

In this paper we use the Generalised Population Based Incremental Learning (GPBIL) in order to find profit-maximizing strategies for the Artificial Payment Card Market (APCM). The artificial market has modeled explicitly a multidimensional consumers’ and merchants’ demand for payment instruments. Given the complex shape of the demand, we have found that the GPBIL effectively explores the areas ...

The payment industry has been characterized by a small number of players that operate the schemes for the facilitation of credit and debit card payments. Over the years, various initiatives have been taken in order to increase competition and hence cost efficiency within the industry. One of the latest efforts is the introduction of Payment Service Directive II (PSDII) within the European Union...

 Advancement in payment technologies have an important impact on the quality of life. The emerging payment technologies create both opportunities and challenges for future. Being a quick and convenient process, contactless payment gained its momentum, especially in merchants, where throughput is the main important parameter. However, it poses risk to issuers as no robust verification method of...

Charles Sprenger and Joanna Stavins Abstract: Approximately half of credit card holders in the United States regularly carry unpaid credit card debt. These so‐called “revolvers” exhibit payment behavior that differs from that of those who repay their entire credit card balance every month. Previous literature has focused on the adoption of debit cards by people who carry credit card balances, ...

This paper is concerned with the business strategy in managing payment innovations. Particularly, the study looks at the smart card electronic cash (e-cash) innovation in the financial service industry. The smart card e-cash has yet to overcome obstacles to its diffusion. Given the e-commerce opportunity, banks and non-banks compete to deploy smart card technology for Internet use. A review of ...

In this article, we present a theoretical model to study the ability of banks to influence the consumer’s payment instrument choice. Unlike most two-sided market models where benefits are exogenous, we explicitly consider how consumers’ utility and merchants’ profits increase from additional sales resulting from greater security and access to credit lines. Consumers participate in payment card ...

In a contactless transaction, when more than one card is presented to the payment terminal’s field, the terminal does not know which card to choose to proceed with the transaction. This situation is called card collision. EMV (which is the primary standard for smart card payments) specifies that the reader should not proceed when it detects a card collision and that instead it should notify the...

Most of the academic literature on retail payment systems focuses, for tractability reasons, on the case of a single payment system. However, a more realistic situation is one where several systems compete and where consumers have the choice between several means of payment (debit card, credit card, charge card, cheque, transfer, ...). This article summarises the small literature that has model...

By using a unique data set that contains detailed information on consumer perceived attributes of payment methods and consumer perceived acceptance of payment methods by merchants, we estimate the direct effects of rewards card programs on consumer payment choice for in-store transactions. Our estimation approach, which follows Harris and Keane [1999], allows us to alleviate the endogeneity pro...