More than Money: The Development of a Competitive Electronic Payments Industry in the United States
Payment Card Economics Review, Vol. 2, pp. 1-27, Winter 2004
26 Pages Posted: 24 Jan 2005
Paying with plastic has become a way of life for most consumers and merchants in the United States - as well as in many other nations around the world. Today, most Americans carry several payment cards in their wallets and most merchants accept many different brands of cards for payments.
An intensely competitive industry services two sides of the market in the United States - consumers who wish to pay with plastic and merchants who are willing to be paid with plastic. A crucial element in the development of this industry was the emergence of the cooperative associations Visa and MasterCard.
Both Visa and MasterCard represent a unique blend of competition and cooperation. Member banks cooperate in a few key areas that generate efficiencies for consumers and merchants - such as sharing the operation of the vast computer networks that now enable transactions to be completed in a few seconds. Members compete in every other dimension - interest rates, fees, service and innovative offerings.
This paper tells the story of Visa and MasterCard - how they injected competition into the fledgling payment card industry and how the explosive growth that followed benefited American consumers and merchants alike.
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