IMF Working Papers

Innovation, Deregulation, and the Life Cycle of a Financial Service Industry

By Fumiko Hayashi, Grace B Li, Zhu Wang

August 18, 2015

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Fumiko Hayashi, Grace B Li, and Zhu Wang. Innovation, Deregulation, and the Life Cycle of a Financial Service Industry, (USA: International Monetary Fund, 2015) accessed November 8, 2024
Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines innovation, deregulation, and firm dynamics over the life cycle of the U.S. ATM and debit card industry. In doing so, we construct a dynamic equilibrium model to study how a major product innovation (introducing the new debit card function) interacted with banking deregulation drove the industry shakeout. Calibrating the model to a novel dataset on ATM network entry, exit, size, and product offerings shows that our theory fits the quantitative pattern of the industry well. The model also allows us to conduct counterfactual analyses to evaluate the respective roles that innovation and deregulation played in the industry evolution.

Subject: Banking, Economic sectors, Expenditure, Financial services, Public expenditure review, Services sector, Technological innovation, Technology

Keywords: ATM network, ATM-debit card, ATM-debit network, ATM-debit service, Automated teller machine, Debit innovation, Deregulation, Industry Dynamics, Innovation, Public expenditure review, Services sector, Shakeout, Technological innovation, WP

Publication Details

  • Pages:

    42

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2015/192

  • Stock No:

    WPIEA2015192

  • ISBN:

    9781513537733

  • ISSN:

    1018-5941

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