Search Results
Discussion Paper
Account-to-account electronic money transfers: recent developments in the United States
This paper reviews recent developments in online and mobile banking in the United States that provide bank account holders with low-cost interfaces to manage account-to-account electronic money transfers. The paper analyzes the emerging decentralized market in which A2A money transfers are becoming available in the United States and compares it with the A2A market in other countries. The paper constructs analytical examples to explain and evaluate the structure of the emerging U.S. market and discusses possible policy actions that may enhance the use of A2A money transfers in the United ...
Journal Article
Digital Currency, Digital Payments, and the 'Last Mile' to the Unbanked
Digital forms of payment are either not accessible or highly costly for unbanked consumers. This is because these forms of payment must be "funded" by some source of money, such as cash or a bank account. That creates the "last-mile" problem for the unbanked. This article examines various solutions for the funding problem that have been proposed in the literature, by regulators, and in bills submitted to Congress.
Working Paper
Defining Households That Are Underserved in Digital Payment Services
US households that lack digital means of making and receiving payments cannot participate fully in an increasingly digitized economy. Assessing the scope of this problem and addressing it requires a definition of households that are underserved in digital payments. Traditional definitions of households underserved in the banking system—those that are unbanked and those that are underbanked—do not account for the ownership of nonbank transaction accounts that can be used to make and receive digital payments. In this paper, we define households underserved in digital payments by considering ...
Working Paper
Low-Income Consumers and Payment Choice
Low-income consumers are not only constrained with spending, but also with the type and variety of payment methods available to them. Using a representative sample of the U.S. adult population, this paper analyzes the low possession (adoption) of credit and debit cards among low-income consumers who are also unbanked. Using a random utility model, I estimate the potential welfare gains associated with policy options suggested in the literature to provide subsidized and unsubsidized debit cards to this consumer population.
Discussion Paper
Why don’t most merchants use price discounts to steer consumer payment choice?
Recent legislation and court settlements in the United States allow merchants to use price discounts to steer customers to pay with means of payment that are less costly to merchants. This paper suggests one method of calculating merchants? change in profit associated with giving price discounts to buyers who pay with debit cards and cash. We use data from the pilot of the Boston Fed?s Diary of Consumer Payment Choice to compute rough estimates of the expected net cost reduction by merchant type that may result from debit card and cash price discounts. We find that steering consumers to debit ...
Working Paper
Why Do Payment Card Networks Charge Proportional Feeds?
This paper explains why payment card companies charge consumers and merchants fees which are proportional to the transaction values instead of charging a fixed per-transaction fee. Our theory shows that, even in the absence of any cost considerations, card companies earn much higher profit when they charge proportional fees. It is also shown that competition among merchants reduces card companies' gains from using proportional fees relative to a fixed per-transaction fee. Merchants are found to be the losers from proportional fees whereas consumer and social welfare are invariant with respect ...
Working Paper
Limited Deposit Insurance Coverage and Bank Competition
Deposit insurance schemes in many countries place a limit on the coverage of deposits in each bank. However, no limits are placed on the number of accounts held with different banks. Therefore, under limited deposit insurance, some consumers open accounts with different banks to achieve higher or full deposit insurance coverage. We compare three regimes of deposit insurance: No deposit insurance, unlimited deposit insurance, and limited deposit insurance. We show that limited deposit insurance weakens competition among banks and reduces total welfare relative to no or unlimited deposit ...
Report
Merchant steering of consumer payment choice: lessons learned from consumer surveys
Recent policy changes allow merchants to influence consumers? choice of payment instruments by offering price discounts and other incentives. This report describes lessons learned from using consumer survey responses to assess whether merchants tried to influence buyers? choice of payment method. To measure the effects of these recent policy changes, we included questions about merchant steering in pilot versions of a new diary survey of U.S. consumers. Our findings are inconclusive because some respondents interpreted the questions differently from the way we intended. This report aims to ...
Report
How are U.S. consumers using general purpose reloadable prepaid cards?: are they being used as substitutes for checking accounts?
Owners of general purpose reloadable prepaid cards (GPR) who do not have checking accounts comprise 4.8 percent of U.S. adults, according to the 2012 Survey of Consumer Payment Choice. This report explores two important aspects of prepaid card use: Do owners of GPR prepaid cards who lack checking accounts use these cards differently than those who have checking accounts? Are these cards substituting for payment services that have traditionally been provided only via traditional checking accounts?