An introduction to the economics of payment card networks

Open payment card networks typically coordinate the activities of thousands of financial institutions that issue cards, millions of retail locations that accept them, and several hundred million consumers that use them. This coordination can include the collective setting of certain prices and other controversial network rules. Such practices have recently come under the scrutiny of antitrust authorities in the U.S. and abroad. This paper provides a brief overview of the economics of the payment card industry, explaining some of the differences from the textbook model of competitive markets. Such differences are important factors for the antitrust analysis of payment card networks. ; Also issued as Payment Cards Center Discussion Paper No. 03-08Payment systems

Prepaid cards: an important innovation in financial services

This paper describes the characteristics of closed-system and open-system prepaid cards. Of particular interest is a class of open-system programs that offer a set of features similar to conventional deposit accounts using card-based payment applications. The benefits that open-system prepaid cards offer for consumers, providers, and issuing banks contribute to the increased adoption of these payment applications. Using these cards, consumers can pay bills, make purchases, and get cash from ATM networks. At the same time, consumers who hold prepaid cards need not secure a traditional banking relationship nor gain approval for a deposit account or revolving credit. By offering prepaid cards, issuing banks may meet the financial needs of consumers who may not otherwise qualify for more traditional banking products and these banks may do so with a card-based electronic payment application that essentially eliminates credit risk for the bank.Payment systems

Using federated social networks for efficiently distributing CVE information

This document describes an open method for distributing information related to CVEs using social networks (in particular the open standard ActivityPub), which would allow users to get updates for specific CVE reports or specific events, and also potentially capture feedback from users around these updates. The CVE reporting system is the main vehicle for openly distributing information related to security vulnerabilities in software or configurations of software. CVE reports are useful but it has proven to be difficult to easily inform users about updates to CVE reports. In response a whole industry has sprung up around CVE and aggregation and distribution of information related to CVEs to fill this gap. The platforms used for distributing the aggregated information are closed and require payment to access the information. keywords: activitypub, fediverse, cve, cwe, security, social networks, activitystrea

A Survey on Off-chain Networks: Frameworks, Technologies, Solutions and Challenges

Blockchain has received increasing attention in academia and industry. However, the increasing transaction volumes and limited on-chain storage underscore scalability as a key challenge hindering the widespread adoption of blockchain. Fortunately, off-chain networks that enable transactions outside the blockchain show promising potential to mitigate the scalability challenge. Off-chain solutions that address blockchain scalability hurdles, such as payment channel networks, facilitate secure and fast off-chain transactions, thus relieving the main chain's strain. In this article, we provide a comprehensive review of key technologies, solutions, and challenges of off-chain networks. First, we introduce the background of off-chain networks encompassing design motivation, framework, overview, and application scenarios. We then review the key issues and technologies associated with off-chain networks. Subsequently, we summarize the mainstream solutions for the corresponding key issues. Finally, we discuss some research challenges and open issues in this area.Comment: 30 pages, 5 figure

European payment instruments: Institutional determinants of an efficient POS payment mix

This thesis sheds light on the functioning and characteristics of payment systems to serve as a foundation for understanding the drivers for higher payment system efficiency. Its central goal is to develop insights into the determinants of collective payment choice suitable to lower payment costs to society. So far, the institutional environment, as potential important influence on the payment instrument mix, has not been focused on in the literature. Therefore, particular emphasis is laid on the empirical analysis of the impact of institutional factors on the share of card payments on consumer spending at the point of sale (POS). For this, a unique panel data set is constructed covering the eight most important European payment markets ranked by non-cash transaction volumes. The empirical results allow formulating conditions necessary to achieve a more efficient payment mix. They also form a basis for the assessment of related policy measures with a focus on the SEPA project in terms of their efficiency enhancing effect. Future research could possibly build upon the panel data collected.:1 Introduction 1.1 Payment behaviour in selected European countries 1.2 Research question and approach 2 Foundations: Payment systems and markets 2.1 Functioning of payment systems 2.1.1 Payments, market participants and payment system 2.1.2 Payment instruments and methods 2.1.3 Clearing and settlement arrangements 2.1.4 First observations on obstacles to payment systems development 2.2 Network character of payment markets 2.2.1 Theories of networks 2.2.2 Demand-side network effects in payment markets 2.2.3 Two-sided markets and payment cards 2.2.4 Supply-side economies of scale and open access to infrastructure 2.2.5 Obstacles to payment system development 3 Efficiency of payment systems 3.1 Research on payment infrastructure costs 3.1.1 Efficiency of interbank retail payment systems 3.1.2 Efficiency of intrabank payment processing 3.1.3 Factors influencing infrastructure efficiency 3.2 Research on payment instrument costs at the POS 3.2.1 Methodology and classification of the literature 3.2.2 Estimates of payment costs at the POS 3.2.3 Indicative efficiency ranking of payment instruments 4 Research on payment instrument choice at the POS 4.1 Data sources and categorisation of payment choice determinants 4.2 Price characteristics of payment instruments 4.3 Non-price characteristics of payment instruments 4.4 Transaction attributes 4.5 Constraints on payment choice 4.6 Developing an institutional view of payment choice 5 Empirical analysis: Institutional determinants shaping the POS payment mix 5.1 Two-step modelling approach 5.2 Panel construction and exploration of key data series 5.2.1 Panel data collection and overview of variables 5.2.2 Card usage and cash holding 5.2.3 Payment card diffusion and POS terminal density 5.3 European card schemes and markets 5.3.1 Institutional data collection 5.3.2 Description of European card markets 5.3.3 Overview of institutional data series 5.4 Payment decision 5.4.1 Development of the model and possible extensions 5.4.2 Discussion of the regression results 5.4.3 Diagnostic tests 5.5 Sourcing decision 5.5.1 Diffusion of payment cards 5.5.2 Density of POS terminals 5.5.3 Cash holding and availability at ATMs 5.6 Conclusions: Institutional determinants of payment choice 5.6.1 Linking empirical and theoretical analysis 5.6.2 Route for further research 6 Prospects for an efficient European payment mix 6.1 Objectives for establishing a European payment markets 6.2 SEPA for cards regulatory framework 6.2.1 Regulatory ecosystem 6.2.2 Regulatory framework set by European authorities 6.2.3 Standardization industry initiatives 6.3 Remaining obstacles for an efficient payment mix and outlook Appendix 6.3.1 A–1: Credit- and debit-based payment mechanism 6.3.2 A–2: Multilateral settlement: Access, settlement assets and methods 6.3.3 A–3: Statistical properties of variables 6.3.4 A-4: Unit root tests Reference

Credit Network Payment Systems: Security, Privacy and Decentralization

A credit network models transitive trust between users and enables transactions between arbitrary pairs of users. With their flexible design and robustness against intrusions, credit networks form the basis of Sybil-tolerant social networks, spam-resistant communication protocols, and payment settlement systems. For instance, the Ripple credit network is used today by various banks worldwide as their backbone for cross-currency transactions. Open credit networks, however, expose users’ credit links as well as the transaction volumes to the public. This raises a significant privacy concern, which has largely been ignored by the research on credit networks so far. In this state of affairs, this dissertation makes the following contributions. First, we perform a thorough study of the Ripple network that analyzes and characterizes its security and privacy issues. Second, we define a formal model for the security and privacy notions of interest in a credit network. This model lays the foundations for secure and privacy-preserving credit networks. Third, we build PathShuffle, the first protocol for atomic and anonymous transactions in credit networks that is fully compatible with the currently deployed Ripple and Stellar credit networks. Finally, we build SilentWhispers, the first provably secure and privacy-preserving transaction protocol for decentralized credit networks. SilentWhispers can be used to simulate Ripple transactions while preserving the expected security and privacy guarantees