Network Externalities: The Catch-22 of Retail Payments Innovations

For more than two decades, economists and business journalists have heralded the coming of a paperless society in which electronic payments will quickly replace the use of cash and paper checks in retail transactions. However, although tremendous advances in computing and telecommunications have facilitated development of inexpensive, safe, electronic retail payments, neither the number nor the dollar volume of paper-based transactions has dropped appreciably. Moreover, only modest declines in the growth rate of paper payments are predicted in the near term.