Paying with Plastic: The Digital Revolution in Buying and Borrowing
by By Schmalensee, Richard and Evans, David S.
Category: Business & Economics , Banks & Banking

In Paying with Plastic, David Evans and Richard Schmalensee provide a nontechnical distillation of their years of research on the economic, technological, and institutional forces that have shaped the payment card industry. They show how competition works in an industry that does not nearly fit any of the standard economic models. They describe how the entrepreneurs in this industry solved the chicken-and-egg problem: merchants will not take cards if few consumers use them, and consumers will not use cards if few merchants take them. They also describe how the payment card companies such as MasterCard and Visa have developed complex systems for coordinating transactions among their thousands of bank members and millions of card-holders and accepting merchants. Evans and Schmalensee also describe recent developments in the industry and consider its likely evolution.