Customer Reviews

Paying with Plastic: The Digital Revolution in Buying and Borrowing

5 star:		(5)
4 star:		(3)
3 star:		(1)
2 star:		(2)
1 star:		(0)

 

 

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.

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.

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.

Paying with Plastic first edition has been revamped, rewritten and repositioned here with edition number two.

Most important, Paying with Plastic "2.0" addresses new developments of online payment processing. The authors correctly begin to question the requirement of a merchant set top box for reading "antiquated magnetic stripes".

"Old is new" item #1. Frank McNamara's Diners Club platform would cost about $50,000 to set up today. What's the next mutiny of merchants?

Old is new item #2. Sears starting up Discover and getting to more merchants tha American Express -all within 2 years. Moore's law (doubling within time) would suggest the next Discover would ramp up in less time.

Old is new #3. Industries in decline, lobby best. The payment industry's recently raised interchange rates. Does technology cost more?! No, but growth is stagnant.

Old is new #4. Whoops, John Reed (ex-ceo of Citibank) pulled their Visa membership (p14) and moved the Mastercard logo to the back. Why?! Pull the entire Citi into a closed loop - Citi wanted to be like Amex and Discover. There will be more banks doing this like Chase (Octogon) or MBNA (PayPass).

Old is new #5. Wal-mart as a bank. See Sears above in #2. Wal-marts pays fees to V/MC/D/Amex but they'd rather charge fees and lend money. Why just make $2.00 on the VCR when you can make $10 on the financing. By the way, I like the payment system name, "Wallycard"... just kidding.

I picked up this book because I have always been interested in the history of money and the power of gold as currency. If you are fascinated by the concept of money and how it makes the world go round, Paying With Plastic will whet your appetite.

To many a layperson, paper money has intrinsic value ostensibly because it is backed by gold. That, is furthest from the centre of gravity. Since Bretton Woods, paper money has not been backed by gold and has absolutely no value. The "value" of paper money is perceived and has "value" only because governments say so and because we believe in it. In fact, paper money forms only a very small portion of the money that is in circulation. These days, money is in the form of digits, bits and bytes - expressed as numbers in some computer harddisk.

Paying With Plastic explores a new form of money and how credit cards are the latest form of money - evolving from metal coins, bills of exchange, and paper money. The book traces the early and painful development of what was initially a clumsy mode of payment to what is today one of the most effecient, organised and widespread form of payment.

Paying With Plastic is the leading book of its kind - thorough, yet readable. If you are interested in the concept of money and how the credit card system works, then this book is for you.

If you work in the payments, credit card or finance industry this book is great. It has a very easy to read history about credit cards, who knew Diners Club invented the category in the 50's. But more importantly is how the industry is moving forward and progressing.

Overall, this is a book you read if you need to, but I can't imagine anyone outside the industry reading it. You would have to be the most intellecually curious person in the world if you read this cause you were interested in how credit cards work.

It is a very difficult and ambitious task to write a book about an industry combining indispensable facts and history, fundamental business aspects and subtle economic insights. Yet this is precisely what the authors have done for credit cards, the digital quantum leap in the evolution of payment instruments. It is a very rewarding and fun read, providing the equivalent of a comprehensive 3D animated view of the organization of credit card companies (not-for-profit associations like Visa or for-profit firms like American Express) and of the complex ecosystem that surrounds them: banks, merchants, cardholders, regulators, ATM networks, etc.
And the "lens" of "multi-sided platforms" that Evans and Schmalensee use to conduct their analysis turns out to be so appealing and insightful that one wonders how economists, policy-makers, business people and even casual observers managed to make any sense of this industry before.

Vey basic but covers all the aspect of the credit card world. Also, gives some details about the industry mayor events and the recent developings after the Antitrust litigations against Visa and MasterCard.

Good accounting of history of Payments Industry, Having spent 35 years in this industry, I recognize many people, places and events. Easy to read and understand. Job well done.

Check out my newest Thriller - Bound By Birth by Randall R. Wheeler
Bound By Birth

2nd edition - Outdated. The payment industry is changing and it is not just a US invention. Japan is on the edge of electronic money through your cell phone.

Be aware that this is an overview and a dated one. And you won't be dissappointed.