The changing nature of the payments system: should new players mean new rules?

Abstract

Traditional forms of payment, such as currency, coin, and paper checks, are quickly being eclipsed by electronic forms, such as payments made by ATM, credit card, or automated clearing house. More recently, smart cards, debit cards, and PC banking have joined this electronic army of new ways to make payments. A parallel development has been the entrance of many nonbank players into the payments arena. Nowadays, settlement and clearing can be done by entities that are not necessarily banks, the customary center of the U.S. payments system. As these new entrants grow in number and become more popular, concerns about regulating these newcomers have arisen. In this article, Loretta Mester documents changes in the use of various forms of retail payments and outlines some of the regulatory concerns as she considers the question, Should new players mean new rules?