China's Bank Card Market Network Externalities

As the development of China financial industry and the application of electronic finance, payment card industry , the combination of modern finance and current technology, has been developed in china for more than 20 years. As China's financial market is opening, how to survive the fierce competition with foreign financial institution becomes the key point of payment card market development in China. However, the empirical analysis is relatively limited compared to the theoretical literature in payment card research field currently. Thus, this essay is the first to provide an empirical analysis on China's payment card market's cross-network externality and put forward some corresponding suggestions for policy making.This essay tests China payment card industry's cross-network externality, which has been defined by Roson in 2005. First, we got the conclusion that China payment card market has a significant cross-network externality and the merchant side possesses much stronger externality than the consumer side through the Granger test of time series data from 1996 to 2005. Second, we got the cross-network externality factor is 0.876 by linear regression of panel data from 15 banks since 1996 to 2005. Third, we discovered the main factors that influenced China payment card industry, such as GDP, financial market development, urban citizen consumption amount and so on.