Charles M. Kahn and William Roberds
Working Paper 2002-33
December 2002

PDF iconDownload the full text of this paper in PDF format - (581 KB)

What are the benefits provided by a payment system? What are the tradeoffs in public versus private payment systems and in restricted versus open payments arrangements? Modern payment systems encompass a variety of institutional designs with varying degrees of counterparty protection. We develop a framework which allows for an examination and comparison of payment systems and specification of conditions leading to their adoption. We relate these conditions to the design of present large-value payment systems (Fedwire, CHIPS, Target, etc.).

JEL classification: E400, G210

Keywords: payment systems, limited enforcement, settlement risk

The views expressed here are the authors’ and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors’ responsibility.

Please address questions regarding content to William Roberds, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, Georgia 30309-4470, 404-498-8970, fax 404-498-8956,