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.
About the Authors
David S. Evans is Managing Director of the Global Competition Policy Practice at LECG LLC and part of Market Platform Dynamics, a management consulting firm that focuses on strategic analysis and product design for platform-based firms.
Richard L. Schmalensee is John C. Head III Dean and Professor of Management and Economics at the MIT Sloan School of Management. He is co-editor of Management: Inventing and Delivering Its Future (MIT Press, 2003).
"Well-written and clearly presented.", Tudor Marshall, The Business Economist
"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
"Evans and Schmalensee offer a comprehensive, highly readable account of the evolution of the payment card industry, from the birth of the Diners Club card a half-century ago in Manhattan to the contemporary legal battles between American Express and the bank card associations. Along the way, they analyze the economic impact of the industry in areas ranging from the diffusion of consumer credit to the evolution of multisided market platforms."
—Robert Hahn, Executive Director, AEI-Brookings Joint Center
"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
"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