Search Results
Journal Article
Consumer Payment Choice in the Fifth District: Learning from a Retail Chain
This paper studies payment variation across locations and time using five years of transactions data from a large discount retail chain with hundreds of stores across the Fifth District. The results show that the median transaction size, demographics, education levels, and state fixed effects are the top factors in explaining cross-location payment variation in the sample. We also identify interesting time patterns of payment variation, particularly the longer-term decline in the cash share of transactions largely replaced by debit.
Working Paper
Idea Diffusion and Property Rights
We study the innovation and diffusion of technology at the industry level. We derive the full dynamic paths of an industry’s evolution, from birth to its maturity, and we characterize the impact of diffusion on the incentive to innovate. The model implies that protection of innovators should be only partial due to the congestion externality in meetings in which idea transfers take place. We fit the model to the early experiences of the automobile and personal computer industries both of which show an S-shaped growth of the number of firms.
Journal Article
Debit card interchange fee regulation: some assessments and considerations
The debit card interchange fee regulation introduced by the Durbin Amendment to the Dodd-Frank Act went into effect in October 2011. The regulation limits the maximum permissible interchange fee that a covered issuer can collect from merchants for a debit card transaction. In this article, we review the regulation's first-year impact on different players in the debit card market. We also discuss how the regulation may affect payments efficiency.
Briefing
Rounding Up: The Impact of Phasing Out the Penny
The U.S. government is expected to stop producing new pennies for circulation by early 2026. In 2024, the Treasury incurred a seigniorage loss of $85.3 million on penny production.As pennies phase out, businesses are likely to round cash transactions to the nearest 5 cents, resulting in a "rounding tax."Using data from the 2023 Diary of Consumer Payment Choice, we estimate that rounding tax could cost U.S. consumers approximately $6 million annually.Eliminating the nickel in addition to the penny could result in significantly higher rounding costs: up to $56 million per year for consumers.
Briefing
FedNow and the Development of U.S. Fast Payments
FedNow is a real-time payment service launched by the Federal Reserve in July 2023 that has grown to over 1,700 participating financial institutions. It competes with Real-Time Payments (RTP), a private system launched in 2017.While FedNow and RTP have developed significantly, both systems lag international counterparts in transaction volume, primarily because Americans already have extensive access to digital payments and "instant-feel" alternatives.Despite entering a crowded market, FedNow has the long-term potential to become a core national infrastructure as the U.S. payments system ...
Briefing
How Exclusive Homebuyer Representation Contracts Help Keep Commissions High
Real estate agents use exclusive buyer representation contracts to capture homebuyers and thus limit outside options of home sellers.With outside options severely limited, home sellers pay high commissions (up to 6 percent) to sell their homes on the platform of real estate agents.A ban on exclusive buyer representation contracts is strongly pro-competitive: It improves the sellers' outside options and forces the platform to reduce real estate commissions to constrained-efficient levels.
Working Paper
Payment Choice and the Future of Currency: Insights from Two Billion Retail Transactions
This paper uses transaction-level data from a large discount chain together with zip-code-level explanatory variables to learn about consumer payment choices across size of transaction, location, and time. With three years of data from thousands of stores across the country, we identify important economic and demographic effects; weekly, monthly, and seasonal cycles in payments, as well as time trends and significant state-level variation that is not accounted for by the explanatory variables. We use the estimated model to forecast how the mix of consumer payments will evolve and to forecast ...
Journal Article
Online banking comes of age
Briefing
Real Estate Commissions and Home Search Efficiency
In the U.S. residential housing market, homebuyers' agents typically offer free house showings and collect a commission equal to 3 percent of the price of the home bought by their clients. Our analysis shows that, by deviating from cost basis, this compensation structure may lead to elevated home prices, overused agent services and prolonged home searches. We explain that shifting to a simple a la carte compensation structure may improve home search efficiency and social welfare.
