Saturday, August 10, 2002
Chicago Fed: The growth of person-to-person electronic payments. "I offer three reasons why electronic payments have failed to capture the C2C market. First, technology limitations have hampered the adoption of electronic C2C payments. Second, most consumers find few problems with the use of cash and checks. Third, providers of electronic C2C payments face a large obstacle in implementing fees for these transactions." [Scott Loftesness] Very true. Third parties cannot provide the service for free (they have to pay their bills), and banks (who can provide the service for free) are hesitant to enter this market. There is probably one more reason, "chicken and egg problem". Checks are widespread, you can pay almost everywhere with checks. Any payment system implemented by third parties is limited in scope, so customers are reluctant to join. Case to the point. Why do we use so many checks? "We have identified several potential drivers of electronic payments, such as greater choice of payment instruments for consumers for different payment segments, greater non-face-to-face shopping opportunities, competition from non-bank payment providers, and a greater role by merchants to offer the low-cost payment alternatives. Anecdotal evidence suggests that U.S. consumers are slowly changing their payment habits, and we would expect this trend to continue."
Posted to finance, payments @ 11:12:18 PM ()
Copyright (C) 2002 Paul Kulchenko
Updated 8/22/2002; 5:28:38 PM
