Payment Systems Are Different: Shouldn't Their Regulation Be Too?

This paper makes the case that the structure of payment systems is such that, in contrast to competition in normal markets, private incentives can encourage activities and pricing that do not necessarily improve social welfare. Furthermore, while there is usually a reasonable presumption that where arrangements do not breach antitrust laws they are efficient, this presumption does not necessarily carry over to payment systems. Thus, there is a case for the regulation of payment systems. In particular, the paper suggests that, because of the distinctive nature of payment systems, payment system specific regulation has a number of advantages over generic antitrust regulation.