Pros And Cons Of Payment Cards

explanatory Essay
540 words
540 words

PAYMENT cards are considered as the main drivers of the shift from paper-based towards electronic-based payment instruments, which is commonly viewed as a significant socioeconomic and welfare improvement. Payments systems are going through a period of rapid change with paper-based instruments increasingly giving way to electronic forms of payment. A common feature in banking systems all over the world is the deployment, in parallel, of both automated teller machine (ATM) and point of sale (POS) devices. The coexistence of both trends may be diminishing the substitution rate of cash by electronic payments in developed countries. However the relationships and interactions between these two technologies remain largely unexplored. These relationships are not trivial and, most importantly, may pose different implications for the substitution of cash for electronic payments. On the one hand, banks typically expand ATM networks to allow cardholders to easily withdraw cash. At the same time, they also spread out their POS devices to offer cardholders a cashless method of payment at the poin...

In this essay, the author

  • Explains that payment cards are the main drivers of the shift from paper-based to electronic payment instruments, which is commonly viewed as a socioeconomic and welfare improvement.
  • Explains that efficient payment instrument pricing induces greater use of electronic payment. however, the cost advantages of cards are highly dependent on the type of card employed.
  • Explains that credit cards may not be directly related to rivalry between atm and pos card transactions but may pose some significant indirect effects on the demand for cash since they may increase debt and/or permit them to move their liquidity constraints forward in time.
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