Interchange Fees and Ine¢ ciencies in the Substitution between Payment Cards and Cash
نویسنده
چکیده
This article explains why the collective determination of interchange fees in payment platforms and in ATM networks can lead to ine¢ ciencies in the substitution between payment cards and cash. If the issuers are ATM owners, I show that the pro t maximising interchange fees reect the trade-o¤ that banks make between the pro ts on foreign withdrawals and the possibility to save the costs of cash. Social welfare can be increased by regulating interchange fees, and regulatory interventions should be guided by empirical measures of the costs of cash for banks and merchants. JEL Codes: G21, L31, L42.
منابع مشابه
Regulating Iranian Card payments System as a two sided market
This paper examines the necessity of regulating the Iranian card payments system (SHAPARAK) based on the theory of two-sided markets. The expansion of the payment card system in recent years has arisen some questions regarding the role of all kinds of costs and expenses such as interchange fees, cardholder fees, merchant fees, and network externality in balancing the market. Since there is only...
متن کاملSePa, efficiency, and Payment card comPetition
This paper analyzes the welfare implications of creating a Single Euro Payments Area. We study the effects of increased network compatibility and payment scale economies on consumer and merchant card fees and its impact on card usage. In particular, we model competition among debit cards and between debit and credit cards. We show that competitive pressures dampen merchant fees and increase tot...
متن کاملMust-Take Cards: Merchant Discounts and Avoided Costs∗
Antitrust authorities often argue that merchants cannot reasonably turn down payment cards and therefore must accept excessively high merchant discounts. The paper attempts to shed light on this “must-take cards” view from two angles. First, the paper gives some operational content to the notion of “must-take card” through the “avoided-cost test” or “tourist test”: would the merchant want to re...
متن کاملThe Costs and Benefits of Interchange Fee Regulation: An Empirical Investigation
We study the effect of government encouraged or mandated interchange fee ceilings on consumer and merchant adoption and usage of payment cards in an economy where card acceptance is far from complete. If the pre-regulatory interchange fee was optimal, any change in the interchange fee would result in lower aggregate welfare for consumers, merchants, and banks. Merchant acceptance of debit and c...
متن کاملE-Banking Impact on the Profit Margin of Banks in Iran
Development of e-banking has empirically modified the structure and characters of banks’ performance, efficiency, risk and challenges which have also been articulately recognized based on the international best practices. E-banking brazenly accelerates and restructures financial transactions via enhancing technology and expanding the banking services in comparison with conventional banking. Acc...
متن کامل