The Dutch Banking Chipcard Game

Abstract:     
The banks in the Dutch chipcard market initially agreed on one chipcard system. One system is attractive for companies as well as consumers. Companies, banks and retailers, prevent costs of duplication, while consumers enjoy the benefits of a widespread acceptance of one card and do not face uncertainty regarding the chipcard standard. Two standards could harm the development of the chipcard market. However, one bank withdrew from the initial agreement and introduced its own chipcard system in December 1995. This has resulted in a costly battle between the two banking chipcard standards, duplication costs for retailers, the introduction of a gateway technology in order to establish compatibility for users, and low market acceptance of the chipcards. March 2001, after a struggle of more than five years, the banks decided to return to one chipcard. The rationality of the decision to withdraw, despite the prospect that everybody may be worse off, will be analyzed from the perspective of game theory and the theory regarding standards battles.

Number of Pages in PDF File: 23

Keywords: Banking, chipcard, electronic purse, standardization, game theory

JEL Classification: M, M10, L2, E51

working papers series