Digitization of Retail Payment Systems
Bolt and Chakravorti investigate the research on electronic payment systems. The rapid growth in the use of electronic payment instruments, especially payment cards, is a striking feature of most modern economies. Payment data indicate that strong scale economies exist for electronic payments. Payment costs will decrease through consolidation of payment processing operations as economies of scale are realized. They come to the following conclusions: competition does not necessarily improve the balance of prices for two-sided markets and the ability of merchants to charge different prices is a powerful incentive to convince consumers to use a certain payment instrument. The effect of interventions on consumers, merchants, and banks in Australia, Spain, the European Union, and the United States are discussed. The authors also consider a few areas of payment economics that deserve greater attention.