The Adoption Process of Payment Cards -An Agent- Based Approach

We investigate the payment adoption rate under consumers and merchants awareness of network externalities, given two levels of Interchange Fees in a multi-agent card market. For the purpose of our research, in multiple instantiations of the model (scenarios) the investigated efects are analyzed over the complete process of adoption, until the market s saturation point is achieved. Then, for each scenario, a comparison is made between two diferent levels of Interchange Fees and diferent degree of consumers and merchants awareness. To this end, we model explicitly the interactions between consumers and merchants at the point of sale. We allow card issuers to charge consumers with fixed fees and provide net benefits from card usage, whereas acquirers can charge fixed and transactional fees to merchants. The Interchange Fees flows from acquirers to issuers. Though, we acknowledge that the saturation point of the market is not only determined by network externalities and the level of Interchange Fees, but also by macroeconomic factors which we are not exploring at this stage of research.