The Social Value of Innovation in Payments

Abstract

Although there is a long literature on the social value of innovations, we know of no studies focused on quantifying the social value of innovation in payments. This article provides a model for such quantification. We focus on two recent payment innovations: contactless and tokenization. We quantify the benefits they have generated for the innovators and the benefits they have generated for society, including end-users. We also compare the social benefits of the innovations with the social costs of developing and adopting the innovations. To the extent that costs and benefits can be quantified, we find that the social benefits of these innovations are larger than the private benefits, and that the benefits the innovations have generated for society are larger than the investments society has made to develop and adopt them.

Keywords: payments, innovation, contactless, tokenization, private and social returns

JEL Classification: E42, O3