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http://ssrn.com/abstract=1420061
 
 

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Public-Private Competition in Payments: The Role of the Federal Reserve


Adam J. Levitin


Georgetown University Law Center

June 23, 2009

Georgetown Law and Economics Research Paper No. 1420061
Georgetown Public Law Research Paper No. 1420061

Abstract:     
This Essay argues for the introduction of public competition in the payment card clearance market as a method of addressing suboptimal competition in an industry with extremely high barriers to entry. The Federal Reserve competes with private parties for check, wire transfer, and ACH clearance, and, through competition, has forced par clearance to become the standard in these markets; only by historical accident is the Fed absent as a competitor for payment cards, which do not clear at par.

The Essay sets forth a framework for evaluating whether public competition should be introduced to a private market and argues that the Fed’s provision of a low-cost, par-clearing competitor would improve payment card clearing competition, discourage the consumer overleverage and cross-subsidization that result from the current discounted clearance system, and spur innovation.

Number of Pages in PDF File: 23

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Date posted: June 26, 2009  

Suggested Citation

Levitin, Adam J., Public-Private Competition in Payments: The Role of the Federal Reserve (June 23, 2009). Georgetown Law and Economics Research Paper No. 1420061; Georgetown Public Law Research Paper No. 1420061. Available at SSRN: http://ssrn.com/abstract=1420061 or http://dx.doi.org/10.2139/ssrn.1420061

Contact Information

Adam J. Levitin (Contact Author)
Georgetown University Law Center ( email )
600 New Jersey Avenue, NW
Washington, DC 20001
United States
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