Credit and especially debit card transactions are on the rise worldwide. Interchange fees are an integral part of the pricing structure of credit and debit card transactions. Indirectly paid by merchants to card issuers, interchange fees in most countries are set by credit and debit card networks. But in one country, Australia, the central bank is regulating interchange fees, and in several other countries and areas, including the European Union, Mexico, the Netherlands, Spain, and the United Kingdom, public officials are taking, or considering taking, a more hands-on regulatory stance. In the United States, it is largely the court system that is debating interchange issues. ; The payments industry has a strong vested interest in interchange fees. They are a major portion of costs that merchants pay for processing debit and credit card payments and are a major source of revenue for banks that issue the cards. One reason for recent interest in interchange fees in the United States is a shift in retail payments away from checks. Research sponsored by the Federal Reserve documents a rise in electronic payments and a decline in the use of paper checks, with a milestone recently passed where the majority of noncash payments are now made using electronic instruments. This shift is also occurring in other countries. Since paper checks typically do not have an interchange fee while credit and debit payments do, the shift is a major reason why merchants face a rapidly rising cost of processing payments. Card issuers, on the other hand, rely on associated revenues to provide a return to their substantial investment in card payment networks. ; Pacheco and Sullivan summarize the proceedings of a conference sponsored by the Federal Reserve Bank of Kansas City, held in Santa Fe, New Mexico, in May 2005, which explored issues surrounding interchange fees. The conference brought together a distinguished group of industry participants, antitrust authorities, central bankers, and academics.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Article provided by Federal Reserve Bank of Kansas City in its journal Economic Review.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Did you know? You can create a compilation of all publications of a group of people, say alumni of a program, your students or memers of an association.