Electronic Funds Transfers and Payments: The Public Policy Issues

245 Pages·1987·5.409 MB·English

by  Elinor Harris Solomon (auth.), Elinor Harris Solomon (eds.)

Electronic Funds Transfers and
Payments: The Public Policy Issues
Electronic Funds Transfers and
Payments: The Public Policy Issues
edited by
Elinor Harris Solomon
The George Washington University
.......
''
Springer-Science+Business Media, B.V.
Ubrary oi Congress Cataloging-in-Publication Data
Electronic funds transfers and payments
Includes bibliographies and index.
1. Electronic funds transfers. 2. Electronic funds
transfers-Government policy. 1. Solomon, Elinar Harris.
HG1710.E45 1986 332.1'028 86-10416
ISBN 978-94-015-7740-3 ISBN 978-94-015-7738-0 (eBook)
DOI 10.1007/978-94-015-7738-0
© 1987 by Springer Science+Business Media Dordrecht
Orginally published by Kluwer· Nijhoff Publishing. Boston in 1987
Softcover reprint of the hardcover 1s t edition 1987
AII rights reserved. No part of Ihis publicatien may be reproduced,
stared in a retrieval system. ar transmiUed in any larm ar by any means,
mechanical, photocopying. recarding, or otherwise. witheut the prior
written penmission oi the publishers, Springer-Science+Business Media, B.v.
Contents
Contributing Authors vii
Preface ix
Introduction
I
Money, Nowa nd Future 13
1
Modern Money 17
Paul B. Henderson, Jr.
2
Payments and the Economic Transactions Chain 39
Linda K. S. Moore
3
Telecommunications Policy Issues: The New Money Delivery Modes 63
Henry Geller
II
Electronic Payments Systems Links and Risks 79
4
Payments System Risk, Market Failure, and Public Policy 83
David Burras Humphrey
5
International Payments and EFT Links 111
Allen B. Frankel and Jeffrey C. Marquardt
v
vi ELECTRONIC FUNDS TRANSFERS AND THE PAYMENTS REVOLUTION
Ill
Macroeconomic Policy Updated 131
6
Monetary Rules and Control in Brave New World 137
James Tobin
7
Monetary Modeling in a World of Financial Innovation 159
Thomas Havrilesky
IV
Microeconomic Issues: Banks and Consumers 189
8
The New Money and the Old Monopoly Problem 193
Almarin Phillips
9
EFT: A Consumer's View 211
Elinor Harris Solomon
Index 239
Contributing Authors
Allen B. Frankel,
Chief, International Banking Section,
Division of International Finance,
Board of Governors of the Federal Reserve System,
Washington, D.C. 20551
Henry Geller,
Director, Washington Center for Public Policy Research (Duke University),
1776 K Street, N.W. (Suite 900),
Washington, D.C. 20006
Thomas M. Havrilesky,
Professor of Economics, Duke University,
Department of Economics,
Durham, North Carolina 27706
Paul B. Henderson, Jr.,
Operations Consultant; Senior Vice President for Operations, Federal Reserve
Bank of New York (1978-84),
Box4589
525 Spencer Way
Incline Village
Nevada,89450
David Burras Humphrey,
Vice President and Payments System Advisor,
Federal Reserve Bank of Richmond,
P.O. Box 27622,
Richmond, Virginia 23261
Jeffrey C. Marquardt,
Economist, Bank for International Settlements (Basle, Switzerland) and Division of
International Finance;
Board of Governors of the Federal Reserve System,
Washington, D.C. 20551
vii
viii ELECTRONIC FUNDS TRANSFERS AND THE PAYMENTS REVOLUTION
Linda K. S. Moore,
Editor-in-Chief, Electronic Banking Abroad,
Research Company of America,
654 Madison Avenue,
New York, New York 10021
Almarin Phillips,
Hower Professor of Public Policy and Professor of Economics and Law,
University of Pennsylvania,
Philadelphia, Pennsylvania 19104
Elinor Harris Solomon,
Professor of Economics, The Department of Economics,
The George Washington University,
Washington, D.C. 20052
James Tobin,
Sterling Professor of Economics, Yale University,
P.O. Box 2125 Yale Station,
New Haven, Connecticut 06520-2125
Preface
The developing new financial technology is changing our concepts of
money, banks, and the payments media. The 1980-1982legislation enables
financial institutions to take advantage of the electronic funds transfer
(EFT) opportunities. Other legislation is being considered by Congress
and the states. However, important public policy questions remain.
Their identification demands a multidisciplinary synthesis. This the
book attempts to accomplish by drawing on unique skills of distinguished
academic and Federal Reserve economists, lawyers, and other experts
in the new financial technology. It is hoped that our combined efforts in
the chapters that follow will help identify potential directions of change
and illuminate some major public policy issues for further investiga
tion and resolution.
The areas we explore from diverse backgrounds are fourfold. First, part
I examines the updated character of money, the transformed processes of
money transmission around the world. Part II looks at the evolving
payments and settlement arrangements, both national and international,
and the risks that are beginning to surface. Part III addresses the monetary
policy issues and the kinds of rethinking which macroeconomic theory and
modeling may require in this brave new world. Part IV, finally, analyzes
the role of the market, deregulation, and antitrust policy in EFT develop
ment. Consumer issues and trade-offs come here also to the forefront.
How to use this book. We have attempted to provide coverage of many
issues. We have also sought diversity of viewpoints and skills. This book is
designed for use, therefore, by all practitioners of the new money technol
ogy, be they banks, financial institutions, nonbank suppliers, or legislators.
Emphasis is on international as well as national questions. We have
also pitched the volume for researchers in the new money technology, the
ix
x ELECTRONIC FUNDS TRANSFERS AND THE PAYMENTS REVOLUTION
economists, lawyers, and operational engineers who can put their best
skills to use jointly in developing practical solutions.
This book is planned for classroom use as well. In order to aid the
professor, the introduction sets forth the format of the book and the recur
rent themes one finds throughout the individual chapter discussions. It
also presents questions toward which the individual chapters have been
directed. In addition, each of the four parts is preceded by background
discussion and integration of the individual papers.
Money and Banking students can most profitably study parts I and II for
an updated view of money and payments mechanisms, now and future.
Monetary Theory and Macroeconomics classes may focus on part III, then
supplement the macro theory with earlier operational and descriptive
portions of the book according to interest. Students of antitrust and
industrial organization economics may find part IV useful for micro
economic and legal analysis. Consumer users and students of banking law
should also start with part IV, then turn to the operational realities
highlighted in earlier papers.
This volume is, however, not a textbook in any standard sense of the
term. It is designed for all of us since all are users of the new payments
technology and its elusive supermoney. Each part meshes with the chapters
preceding and adds fuller coloration to the story. The book is designed to
elicit discussion; research into new, uncharted areas; a rethinking of our
traditional central banking concepts; and, yes, controversy.
Acknowledgments. I wish to express appreciation to the distinguished
and dedicated contributors for their penetrating original analyses of the
many complex issues. I also admire very much their courage in expressing
openly their reservations as well as praise for the new technology. They
have patiently and skillfully answered my many questions and provided,
for me surely, an intellectually exciting and often consuming experience.
I owe a debt of gratitude to Professors Robert Goldfarb, John Kwoka,
Michael Bradley, Robert Dunn, James Barth, Lisa Pittman, and other
Economics Department colleagues and students at The George Washington
University. I wish also to thank Stephen Rhoades, Steven Felgran, Robert
Gemmill, Penelope Hartland-Thunberg, Eleanor Hadley, Phillip Ruppell,
Spencer Nilson, William Curran, and Federal Reserve Board Governor
Henry Wallich for valuable suggestions and help. The vast expertise of the
Electronic Banking Economist Society (THEBES) has been much appre
ciated. Catherine Forman has provided outstanding secretarial assistance
in preparation of my portions of this volume. Zachary Rolnik and David
Marshall have been supportive in every way in guiding this project to
completion, and I am especially grateful for Kluwer-Ni jhoff 's strong
encouragement and enthusiasm.