Thursday, May 27, 2004

Payment instruments and network effects: why Americans still write checks

Next week, Gottfried Leibbrand will defend his dissertation Payment instruments and network effects: Adoption, harmonization and succession of network technologies accross countries in Maastricht. His dissertation fits nicely in the research tradition of the Maastricht Economic Research Institute on Innovation and Technology. And the summary for layment, Why Americans still write checks, fits similarly in the McKinsey tradition to provide well written executive summaries.

The dissertation contains two models to further explore and explain network effects in payments and the stepwise innovation and adoption of technology. So after reading the dissertation one understands why:

- payment systems are national (as a result of the underlying transaction patterns),

- one single technology standard may not be the only equilibrium outcome on a national or European level,

- choices for technological innovation and adoption build upon previous choices and existing infrastructures,

- stepwise innovation is the way forward rather than paradigm shifts and payment systems that are built from scratch.

The theory is applied to a number of cases and thus allows testing and discussion on the basis of empirical data. And although some theoretic deliberations on network effects do actually reach this more detailed level, the adapted models of Leibbrandt provide more insight into the subject matter and are more close to reality in the payments industry.

In sum, the dissertation makes particularly good reading for public policy makers in the payment industry as they might want to reconsider the popular one-single-standard idea (and some more issues...). Other than that, we can rest assured that the content of the work and its paradoxical copyright notice (in which copying, pasting, disseminating of the work is encouraged) will contribute to its visibility to both practicioners and academics.