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Unusual price-volume relationships in transaction pricing for payment cards
Journal of Payments Strategy & Systems,
1
(3),
273-281
(2007)
Abstract
This paper documents a number of instances where the volume of credit and debit transactions shows unusual elasticity with respect to price — either falling as prices fall, or increasing as prices increase. It explores these cases by analysing payment transaction volumes in three countries with broadly similar economies: the USA, the UK and Australia. A conclusion is reached that the anomalies are genuine, and a hypothesis is presented to account for the anomalous relationship between price and volume. Payment instruments studied include credit cards and debit cards, drawing from primary materials published by the US Federal Reserve, the Nilson Report, the Reserve Bank of Australia, the Bank of England and APACS.
Keywords: payments; transaction pricing; debit; credit; US; UK; Australia
The full article is available to subscribers to the journal.
Author's Biography
Eric Dunn a General Partner at Cardinal Venture, is responsible for Cardinal’s investments in Tempo Payments Inc. (where he serves as Chairman), LiveCapital (where he served as Chairman; acquired by Dun & Bradstreet), Adaptive Planning and SuccessFactors. Eric also serves on the boards of Corillian (NASDAQ: CORI), Tibco (NASDAQ: TIBX) and PayCycle. Prior to joining Cardinal Venture Capital in 2003, Eric was an independent private investor, making investments in early stage software and technology companies. From 1986 to 2000, Eric was a member of the senior management team of Intuit Inc. (NASDAQ: INTU) during its growth from a four-person start-up to a leader in financial software with over US$1bn in annual revenue. At Intuit, Eric served as CFO, VP/GM and SVP/CTO, while also leading the initial development efforts for Quicken for Windows and Quicken for Macintosh. Eric was CFO during Intuit’s IPO and the company-shaping acquisition of ChipSoft (Turbotax) and also initiated many of Intuit’s activities in electronic financial services and its international expansion. Before working at Intuit, Eric was a management consultant at Bain and Company, and also worked at IBM for two years as a software engineer. Eric graduated Summa Cum Laude with an A.B. in Physics from Harvard College and received his MBA from Harvard Business School where he was a Baker Scholar.
