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An Economic Analysis of the Determination of Interchange Fees in Payment Card Systems

Author

Listed:
  • Rochet Jean-Charles

    () (IDEI, Toulouse University, and LSE.)

  • Tirole Jean

    (IDEI, Toulouse University, and MIT)

Abstract

The paper investigates, in a non-technical fashion, the economic determinants of interchange fees in payment card systems and the potential need for their regulation. Among other things, it demonstrates that the proposal for a cost-based regulation of interchange fees relies on an erroneous, vertically organized, model of the payment card industry.

Suggested Citation

  • Rochet Jean-Charles & Tirole Jean, 2003. "An Economic Analysis of the Determination of Interchange Fees in Payment Card Systems," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-11, June.
  • Handle: RePEc:bpj:rneart:v:2:y:2003:i:2:n:2
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    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:

    1. Kyoung-Soo Yoon & Jooyong Jun, 2016. "Liability, Information, and Anti-fraud Investment in a Layered Retail Payment Structure," Working Papers 2016-12, Economic Research Institute, Bank of Korea.
    2. Anderson, Simon P. & Gabszewicz, Jean J., 2006. "The Media and Advertising: A Tale of Two-Sided Markets," Handbook of the Economics of Art and Culture, Elsevier.
    3. Fumiko Hayashi & Stuart E. Weiner, 2006. "Interchange fees in Australia, the UK, and the United States : matching theory and practice," Economic Review, Federal Reserve Bank of Kansas City, issue Q III, pages 75-112.
    4. Snellman, Heli, 2006. "Automated teller machine network market structure and cash usage," Scientific Monographs, Bank of Finland, number 2006_038, January.
    5. James J. McAndrews & Zhu Wang, 2008. "The economics of two-sided payment card markets: pricing, adoption and usage," Research Working Paper RWP 08-12, Federal Reserve Bank of Kansas City.
    6. Zenger, Hans, 2011. "Perfect surcharging and the tourist test interchange fee," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2544-2546, October.
    7. Samuel Rutz, 2010. "Interchange Fees as a Mechanism to Raise Rivals' Costs - Some Evidence from Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 146(II), pages 507-532, June.
    8. Zenger, Hans, 2010. "Perfect surcharging and the tourist test interchange fee," MPRA Paper 27004, University Library of Munich, Germany.
    9. Weiner Stuart E. & Wright Julian, 2005. "Interchange Fees in Various Countries: Developments and Determinants," Review of Network Economics, De Gruyter, vol. 4(4), pages 1-34, December.
    10. Economides, Nicholas & Tåg, Joacim, 2012. "Network neutrality on the Internet: A two-sided market analysis," Information Economics and Policy, Elsevier, vol. 24(2), pages 91-104.
    11. Nicholas Economides, 2007. "Nonbanks in the payments system: vertical integration issues," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City.
    12. Wang, Zhu, 2010. "Market structure and payment card pricing: What drives the interchange?," International Journal of Industrial Organization, Elsevier, vol. 28(1), pages 86-98, January.
    13. Amelio, Andrea & Jullien, Bruno, 2012. "Tying and freebies in two-sided markets," International Journal of Industrial Organization, Elsevier, vol. 30(5), pages 436-446.
    14. repec:bla:coecpo:v:37:y:2019:i:1:p:181-194 is not listed on IDEAS
    15. David S. Evans & Richard Schmalensee, 2005. "The economics of interchange fees and their regulation : an overview," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City, issue May, pages 73-120.
    16. repec:mnb:finrev:v:17:y:2018:i:1:p:83-109 is not listed on IDEAS
    17. Schmiedel, Heiko & Bolt, Wilko & Foote, Elizabeth, 2011. "Consumer credit and payment cards," Working Paper Series 1387, European Central Bank.
    18. Schmiedel, Heiko & Börestam, Ann, 2011. "Interchange fees in card payments," Occasional Paper Series 131, European Central Bank.
    19. Oz Shy & Zhu Wang, 2008. "Why do card issuers charge proportional fees?," Research Working Paper RWP 08-13, Federal Reserve Bank of Kansas City.
    20. Jan KRÄMER & Michael WOHLFARTH, 2015. "Regulating Over-the-Top Service Providers in Two-Sided Content Markets: Insights from the Economic Literature," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(99), pages 71-90, 3rd quart.
    21. Patricia Guajardo F. & Sergio Rodríguez E., 2008. "Funcionamiento del Mercado Tarjetas de Crédito y Debate sobre Tarifas de Intercambio," Notas de Investigación Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 11(1), pages 137-144, April.
    22. Carol L. Clark, 2005. "Shopping without cash: the emergence of the e-purse," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 34-51.

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