Paying with Plastic: The Digital Revolution in Buying and Borrowing [Paperback]

David S. Evans (Author), Richard Schmalensee (Author)

Book Description

Publication Date: December 17, 2004

The payment card business has evolved from its inception in the 1950s as a way to handle payment for expense-account lunches (the Diners Club card) into today's complex, sprawling industry that drives trillions of dollars in transaction volume each year. Paying with Plastic is the definitive source on an industry that has revolutionized the way we borrow and spend. More than a history book, Paying with Plastic delivers an entertaining discussion of the impact of an industry that epitomizes the notion of two-sided markets: those in which two or more customer groups receive value only if all sides are actively engaged. New to this second edition, the two-sided market discussion provides useful insight into the implications of these market dynamics for cardholder rewards, merchant interchange fees, and card acceptance. The authors, both of whom have researched the industry for more than 25 years, also examine the implications of the recent antitrust cases on the industry as well as other business and technological changes -- including the massive consolidation brought about by bank mergers, the rise of the debit card, and the emergence of e-commerce -- that could alter the payment card industry dramatically in the years to come.

Editorial Reviews

Amazon.com Review

For better or worse, most of us have at least one of the 720 million little plastic cards that are used each year to complete $860 billion worth of purchases at 15 million incredibly varied merchant locations throughout the world. This is a far cry from the humble beginnings of these myriad credit, debit, and charge cards, which just a few decades ago were generally a perk offered only to elite customers for the acquisition of fine meals, hotel rooms, department-store goods, and oil-company products. They are now so common and such an integral part of our economy, in fact, that few pay them much mind--a situation that makes David Evans and Richard Schmalensee's Paying with Plastic all the more interesting. Evans, senior vice president of National Economics Research Associates, and Schmalensee, dean of MIT's Sloan School of Management, meticulously trace the history of these cards from both the consumer and merchant perspectives in this surprisingly appealing volume, which will prove enlightening to anyone who ever wondered how plastic money works. --Howard Rothman --This text refers to an out of print or unavailable edition of this title.

Review

"Authors Evans and Schmalensee have written the definitive book on the business of bank cards. The reader will come away an expert, with a clear understanding of the business drivers, the players, and the complex issues behind the business of bank cards. This should be required reading for anyone engaged in the bank card industry, from executives at the associations to systems integrators and vendors that service this market."--John C. Gould, Director of Consumer Lending and Bank Cards Practice, TowerGroup

"An excellent treatment of the payment card industry's evolving structure and conduct." Daniel Pope Enterprise & Society

" Paying with Plastic examines a quiet revolution in the U.S. economy the steady transition from checks and cash to credit, debit, and charge cards. The authors describe the causes and consequences of this transition in terms of economics and law all in plain English that the nonspecialist can understand. This book has become an immensely valuable source on an important subject." Robert Pitofsky, Joseph and Madeline Sheehy Professor in Antitrust and Trade Regulation Law, and Dean Emeritus, Georgetown Law School, and former Chairman, Federal Trade Commission

" Paying with Plastic is a practical discussion about a complex industry that drives almost $3 trillion in worldwide purchases every year. Evans and Schmalensee illuminate the inner workings of an industry that many know by virtue of the cards we carry in our wallets, but few really understand. It is required reading for anyone who works in, works with, or studies payment cards." Timothy Muris, Foundation Professor of Law, George Mason University, and former Chairman, Federal Trade Commission

"This very readable book will appeal not only to policymakers and business executives, but also to the theoretically inclined economist. Evans and Schmalensee provide a rigorous analysis and deep insights about the credit card industry's fascinating institutional features. Paying with Plastic considerably advances the state of our knowledge and is a remarkable achievement." Jean Tirole, Institut d'Economie Industrielle, Toulouse

"Well-written and clearly presented." Tudor Marshall The Business Economist

"*Paying with Plastic* examines a quiet revolution in the U.S. economy -- the steady transition from checks and cash to credit, debit, and charge cards. The authors describe the causes and consequences of this transition in terms of economics and law -- all in plain English that the non-specialist can understand. This book has become an immensely valuable source on an important subject."--Robert Pitofsky, Dean Emeritus, Georgetown Law School, and former Chairman, Federal Trade Commission

"*Paying with Plastic* is a practical discussion about a complex industry that drives almost $3 trillion in worldwide purchases every year. Evans and Schmalensee illuminate the inner workings of an industry that many know by virtue of the cards we carry in our wallets, but few really understand. It is required reading for anyone who works in, works with, or studies payment cards."--Timothy Muris, Foundation Professor of Law, George Mason University, and former Chairman, Federal Trade Commission

See all Editorial Reviews

Product Details

• Paperback: 360 pages
• Publisher: The MIT Press; second edition edition (December 17, 2004)
• Language: English
• ISBN-10: 026255058X
• ISBN-13: 978-0262550581
• Product Dimensions: 9 x 6 x 0.8 inches
• Shipping Weight: 1 pounds (View shipping rates and policies)
• Average Customer Review: 4.0 out of 5 stars  See all reviews (11 customer reviews)
• Amazon Best Sellers Rank: #486,321 in Books (See Top 100 in Books)

More About the Author

David S. Evans is an economist with a specialty in the study of high-technology businesses, especially those based on software and the Internet, and in platform-based businesses (also known as two-sided markets) that create value by bringing different groups of customers together. He holds academic appointments at the University of Chicago Law School, where he is a Lecturer, and at the University College London where he is the Executive Director of the Jevons Institute for Competition Law and Economics and Visiting Professor. He has authored or edited seven books and more than 100 articles many of which were published in peer-reviewed journals or books. He is the Editor in Chief of Competition Policy International at www.globalcompetitionpolicy.org and Lombard Street at www.FinReg21.com. David is also a strategic advisor and board member for a number of ventures.

Customer Reviews

Most Helpful Customer Reviews

32 of 32 people found the following review helpful:

5.0 out of 5 stars Excellent overview of the development of cards, December 25, 1999

By A Customer

This review is from: Paying With Plastic: The Digital Revolution in Buying and Borrowing (Hardcover)

The authors bring disciplined methodology to the study of "industrial development," using credit cards as a case study. The book is useful not just for its anecdotal review of how credit cards got started & how they are used; and not just for the wealth of statistics it provides on how card & other payment usage has changed over the years; but most importantly, by putting some structure around all that material so that we can understand it coherently. So many books on banking & on industrial development (like things by guru Tom Peters) are just so many anecdotes strung together for 100s of pages, with no "system" for understanding what's being talked about. This book's strength is that it provides the reader with a way of interpreting not only what's in the book but with a way of understanding the incessant new developments in the industry that we read about in the trade press every day. I recommend this book highly to anyone in banking or interested in what's going on in the payments system.

41 of 47 people found the following review helpful:

2.0 out of 5 stars Bias comes through., November 16, 2001

By 

M. McCormack "mmccorma5" (San Jose CA) - See all my reviews
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This review is from: Paying with Plastic: The Digital Revolution in Buying and Borrowing (Paperback)

The authors both are long-time consultants for Visa and it is very apparent in this book. The discussion of MasterCard, Discover, and American Express is limited. The treatment of various legal actions (Nabanco, US DOJ, WalMart, duality) is one sided. There is minimal study of the economics of the business from vantage points (consumer, merchant, acquirer, Issuer, co-branding partner, etc.) other than the card association.

It's clear from some of the statistical material prsented that Visa particpated in the book.

Ever see JAG? It's about a real portrayl of the Navy & Marine Corp as this is of the card industry.

11 of 12 people found the following review helpful:

5.0 out of 5 stars Highly Recommended!, May 9, 2005

By 

Rolf Dobelli "getAbstract" (Switzerland) - See all my reviews
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This review is from: Paying with Plastic: The Digital Revolution in Buying and Borrowing (Paperback)

In this history of payment cards, David S. Evans and Richard Schmalensee provide an amazingly lucid account of a couple of unusual business models: the "two-sided platform," which in the use of payment cards means walking a tightrope between the interests of merchants and consumers; and the "co-opetitive," in which the bank members of MasterCard and Visa cooperate in developing industry practices while competing for business. The authors, who are both former Visa consultants, sound like your favorite college professors - up to date and extremely sophisticated, yet friendly and anecdotal (at one point, they describe a Shell gas station near MIT to make a point about competition among cards). They typically begin chapters with easily understood notions from which they methodically build complex structures of ideas and information. Another virtue of the book is its concreteness - although that occasionally devolves into repetitiveness - starting with an explanation involving electronic signals and following the paper path of what happens when you hand your credit, debit or charge card to a cashier. The authors even consider the design and manufacture of the cards themselves. We recommend this book as essential reading for those in the banking or payment card industries; and it's not a bad idea for card users to read it - which these days means you...and just about everyone else.