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The Dawn of the Plastic Jungle: The Introduction of the Credit Card in Europe and North America, 1950-1975

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  • Bernardo Batiz-Lazo
  • Gustavo A. Del Angel

Abstract

In this paper we discuss the genesis and early international expansion of the bank issued credit card. Empirical evidence documents the limits of a single firm building a proprietary network, because success came to a constellation of participants that combined three characteristics namely a critical mass of both retail customers and retail merchants; the capacity to adopt and implement new technological solutions; and the ability to forge resilient collaboration across national borders. This evidence provides further support to the importance of collaboration in retail financial services as means to appropriate network externalities. We also argue that initial conditions for this industry had greater implications for long-term success than has been acknowledged by other conceptual and empirical studies (in particular the literature around two-sided markets, which has focused attention on the determinants of the interchange fee).

Suggested Citation

  • Bernardo Batiz-Lazo & Gustavo A. Del Angel, 2016. "The Dawn of the Plastic Jungle: The Introduction of the Credit Card in Europe and North America, 1950-1975," Economics Working Papers 16107, Hoover Institution, Stanford University.
    • Handle: RePEc:hoo:wpaper:16107
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    References listed on IDEAS

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    3. Verdier, Marianne, 2006. "Retail Payment Systems: What can we Learn from Two-Sided Markets?," MPRA Paper 2606, University Library of Munich, Germany.
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    5. Zhu Wang & Fumiko Hayashi, 2011. "Product Innovation and Network Survival in the U.S. ATM and Debit Card Industry," 2011 Meeting Papers 725, Society for Economic Dynamics.
    6. Bell, Stephanie, 2001. "The Role of the State and the Hierarchy of Money," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 25(2), pages 149-163, March.
    7. Andrew Mair, 1999. "Learning from Honda," Journal of Management Studies, Wiley Blackwell, vol. 36(1), pages 25-44, January.
    8. James J. McAndrews & Zhu Wang, 2008. "The economics of two-sided payment card markets: pricing, adoption and usage," Research Working Paper RWP 08-12, Federal Reserve Bank of Kansas City.
    9. Bernardo Batiz-Lazo & Gustavo A. Del Angel, 2003. "Competitive collaboration and market contestability: cases in Mexican and UK banking, 1945-75," Accounting History Review, Taylor & Francis Journals, vol. 13(3), pages 339-368.
    10. Jean-Charles Rochet & Jean Tirole, 2002. "Cooperation Among Competitors: Some Economics Of Payment Card Associations," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 549-570, Winter.
    11. Bátiz-Lazo, Bernardo & Wardley, Peter, 2007. "Banking on change: information systems and technologies in UK high street banking, 1919–1969," Financial History Review, Cambridge University Press, vol. 14(2), pages 177-205, October.
    12. Ausubel, Lawrence M, 1991. "The Failure of Competition in the Credit Card Market," American Economic Review, American Economic Association, vol. 81(1), pages 50-81, March.
    13. L. R. Wray, 1990. "Money and Credit in Capitalist Economies," Books, Edward Elgar Publishing, number 474.
    14. Mark Armstrong Author-Email: mark.armstrong@ucl.ac.uk Author-Workplace-Name: University College of London, 2006. "Competition in Two-Sided Markets," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 668-691, Autumn.
    15. repec:bla:econom:v:54:y:1987:i:214:p:155-71 is not listed on IDEAS
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    Blog mentions

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    1. Happy Birthday Credit Cards! Redux
      by bbatiz in The Cashless Society on 2020-09-18 21:56:56

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    Cited by:

    1. Gustavo A. Del Angel, 2016. "Cashless Payments and the Persistence of Cash: Open Questions About Mexico," Economics Working Papers 16108, Hoover Institution, Stanford University.

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    More about this item

    Keywords

    Credit card; payments; cashless; two sided markets; payment tolls; Bank of America; Barclays; Banamex; Bancomer; Banco de Bilbao; British banks; Mexican banks; Spanish banks;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • N2 - Economic History - - Financial Markets and Institutions
    • N8 - Economic History - - Micro-Business History

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