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Faster Payments : Market Structure and Policy Considerations

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Abstract

The U.S. payments industry is in the process of developing ubiquitous, safe, faster electronic solutions for making a broad variety of business and personal payments. How this market for faster payments will evolve will be shaped by a range of economic forces, such as economies of scale and scope, network effects, switching costs, and product differentiation. Emerging technologies could alter these forces and lead to new organizational arrangements or market structures that are different from those in legacy payment markets to date. In light of this uncertainty, this paper examines three hypothetical market structures that may emerge: a dominant-operator environment, a multi-operator environment, and a decentralized environment. Each of these market structures has different implications for the public policy objectives of efficiency, safety, and ubiquity. The paper also considers tools to promote positive outcomes in each market structure.

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  • Garth Baughman & Fumiko Hayashi & Mark D. Manuszak & Aaron Rosenbaum & Joanna Stavins & Kylie Stewart, 2017. "Faster Payments : Market Structure and Policy Considerations," Finance and Economics Discussion Series 2017-100, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2017-100
    DOI: 10.17016/FEDS.2017.100
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    Cited by:

    1. Joanna Stavins, 2021. "Payments Evolution from Paper to Electronic: Bill Payments and Purchases," Working Papers 21-5, Federal Reserve Bank of Boston.

    More about this item

    Keywords

    Faster payments; Market structure and competition; Payment system improvement; Public policy; Retail payments;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • G2 - Financial Economics - - Financial Institutions and Services
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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