Multi-disciplinary Analysis of EFT Regulation: Economic, Ethical and Other Considerations

Following the comparative legal analysis of the substantive provisions of the EFT Code and US EFT Act in Chapter 4 using the critical comparative law method, in this chapter a further in-depth analysis of EFT regulatory options is undertaken using other disciplinary criteria. Namely, by employing economic efficiency criteria, regulation cost-benefit considerations, examining the rationales for government regulation, exploring whether ‘market failure’ is prevalent in the EFT system, a consideration of administrative feasibility and social acceptability of regulatory options, and, finally, examining the role and utility of ethics in formulating financial rules.

This chapter is structured as follows: In Section 5.1, a framework for evaluating the economic efficiency of current EFT regulatory arrangements in Australia and the USA is presented using liability and loss allocation theories. In Section 5.2, a preliminary qualitative cost-benefit analysis is undertaken including looking at the effects of government regulation on EFT consumer utility and social welfare at large, on the one hand, and, on incentives to innovate and supply new products and technologies, on the other. The focus in Section 5.3 is on different regulatory costs and an analysis is conducted on the ways in which legislative (rather than self-regulatory) requirements might affect the cost of providing EFT products and services, including some limited empirical survey evidence. In Section 5.4, a framework is constructed to assist EFT regulators and industry participants to undertake a systematic evaluation of the relative economic costs and benefits of different EFT regulation initiatives. The need to take account of administrative feasibility and social acceptability of a particular regulatory option is discussed in Section 5.5. The role and utility of ethical principles in formulating EFT rules is considered in Section 5.6, and, finally, the conclusion is presented in Section 5.7.