Journal of Financial Market Infrastructures

Pricing, competition and innovation in retail payment systems: a brief overview

Wilko Bolt


This paper looks at competition and innovation in retail payments and their relation to payment pricing and payment efficiency. Payment markets are complex and economic theory cannot always guide us. There is not much consensus on what constitutes an efficient fee structure, and competition between payment networks need not improve economic efficiency.Regulation of retail payment markets should concentrate on the removal of entry barriers in payment markets and providing greater incentives to adopt efficient efficient payment instruments without hampering the innovative potential of the market in the long run. Finally, while the payment landscape is changing rapidly, it is not yet clear which business model is most apt to encourage innovation among competing market players.

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