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Paying with Plastic: The Digital Revolution in Buying and Borrowing (MIT Press) Paperback – December 17, 2004
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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.
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)
Well-written and clearly presented.(Tudor Marshall The Business Economist)
Evans and Schmalensee's Paying with Plastic provides a rigorous analysis and deep insights about the payment card industry's fascinating institutional features. This book will appeal not only to policy-makers and business executives, but also to the theoretically inclined economist. The second edition incorporates much new material, including recent advances to two-sided market economics (to which the authors have made substantial contributions). A remarkable achievement.(Jean Tirole, Institut d'Economie Industrielle, University of Toulouse)
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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.
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'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.
Be aware that this is an overview and a dated one. And you won't be dissappointed.