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The role of the interchange fee in card payment systems

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Author Info

  • Éva Keszy-Harmath

    (Magyar Nemzeti Bank (central bank of Hungary))

  • Gergely Kóczán

    ()
    (Magyar Nemzeti Bank (central bank of Hungary))

  • Surd Kováts

    ()
    (Hungarian Competition Authority (GVH))

  • Boris Martinovic

    ()
    (Hungarian Competition Authority (GVH))

  • Kristóf Takács

    ()
    (Magyar Nemzeti Bank (central bank of Hungary))

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    Abstract

    The interchange fee applied in four-party card systems transfers incomes in the payment card business from merchants to cardholders. Assessment of the interchange fee and the interpretation of its role have prompted serious professional debate in recent years. Beyond the professional debate, competition proceedings were also launched in connection with interbank agreements related to the interchange fee and the setting of the fee, but so far specific regulation has been adopted only in a few countries. The first part of the study describes the function of the interchange fee and the related economic theories, followed by a discussion of issues arising in connection with the interchange fee from the point of view of competition authorities and regulators. The second part of the study presents the results of analyses relating to the Hungarian payment card market and interchange fees. On the basis of these results, we conclude that prudent regulatory intervention, taking into account both primary and secondary market effects, may be justified in relation to the interchange fee, due to the structure and level of development of the Hungarian market.

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    File URL: http://english.mnb.hu/Root/Dokumentumtar/ENMNB/Kiadvanyok/mnben_muhelytanulmanyok/OP96_EN.pdf
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    Bibliographic Info

    Paper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Occasional Papers with number 2012/96.

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    Length: 86 pages
    Date of creation: 2012
    Date of revision:
    Handle: RePEc:mnb:opaper:2012/96

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    Web page: http://www.mnb.hu/
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    Related research

    Keywords: interchange fee; merchant fee; payment card; merchant; cardholder; acquirer; issuer; competition law; competition authority; restrictive agreement; four-party card system;

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