Even this limited discussion of benefits seems to be missing something–reduced transaction costs. Assume that prior to the existence of electronic payment networks that small retailers and banks were more efficient suppliers of retail services and credit than department stores. But let’s also assume that transaction costs made the bundle of credit and retailing services cheaper for consumers to obtain from department stores than from banks plus small retailers.

Now let’s assume that the rise of electronic payments networks reduces these transaction costs. By signing on to accept electronic payments, a small merchant can enable its customer to access bank supplied credit on terms that are better than those offered by the nearby department stores. So long as the price that the merchant pays to accept the bank supplied credit is lower than the difference between the retail prices offered by the small merchant and the department store, the transaction will move from the department store to the small retailer/bank. But this switch comes with a social benefit, right?