The Importance of the Retail Payment System

DSpace/Manakin Repository

The Importance of the Retail Payment System

Citable link to this page

 

 
Title: The Importance of the Retail Payment System
Author: Scott, Hal Stewart
Citation: Hal S. Scott, The Importance of the Retail Payment System (Retail Payment Systems Conference, Harvard Law School Program on International Financial Systems, Feb. 26, 2015).
Full Text & Related Files:
Abstract: This article explores the importance of an efficient retail payment system and develops an integrated framework for evaluation of the retail payment system by policy makers. It examines the costs and benefits of the various types of retail payment system, focusing on the seven desirable benefits of the retail payment system: (1) finality and reversibility; (2) universality (ability to use at point of sale and remotely); (3) recordkeeping; (4) liquidity (maximizing interest earning assets); (5) security and safety; (6) financial inclusion and access; and (7) fungibility and ease of use (seven benefits).

The article discusses the Coase Theorem, a proposition from transaction cost economics that provides a useful tool for analyzing transaction efficiency. Increased costs are not bad per se since parties are often willing to incur higher costs to achieve their desired results, e.g. higher costs for a more secure form of payment. Indeed, higher costs may often generate higher value to both parties to a transaction. What one wants to reduce are “friction” costs, costs that neither party wants to pay to achieve a desired result, e.g. higher costs produced by lack of information.

While each retail payment system provides certain advantages, e.g. cash for small transactions, overall the analysis suggests that debit and credit cards represent the most desirable payment system for achieving the seven benefits set forth above. This is supported by statistics that indicate that retail payments have increasingly moved toward card payments.
Published Version: http://www.law.harvard.edu/programs/about/pifs/guest-speakers-&-special-events/specialevents/mastercard-2015/hal-scott---mastercard-retail-payment-systems.pdf
Other Sources: http://ssrn.com/abstract=2539150
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:16883011
Downloads of this work:

Show full Dublin Core record

This item appears in the following Collection(s)

 
 

Search DASH


Advanced Search
 
 

Submitters