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Payment card interchange fee regulation and financial institutions: The effects on traditional and fintech financial conglomerates

Author

Listed:
  • Barbosa, Klenio
  • Rocha, Bruno de Paula
  • Pereira, Luan Michel
  • Passos, Luiz Fernando

Abstract

This paper investigates the effects of credit card interchange fee regulation on the performance of traditional and fintech financial conglomerates. Using data from 2017 to 2021 of individual financial institutions and conglomerates operating in Brazil and parameters estimated by previous studies, we simulate the impact of that regulation on financial conglomerates. We find that an interchange fee cap increases the return of fintech conglomerates, whereas it decreases the return of conglomerates led by traditional financial institutions. Furthermore, we find that such regulation reduces the return of all conglomerates, traditional and fintech ones, that provide greater financial sophistication and credit growth.

Suggested Citation

  • Barbosa, Klenio & Rocha, Bruno de Paula & Pereira, Luan Michel & Passos, Luiz Fernando, 2024. "Payment card interchange fee regulation and financial institutions: The effects on traditional and fintech financial conglomerates," Finance Research Letters, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:finlet:v:64:y:2024:i:c:s154461232400521x
    DOI: 10.1016/j.frl.2024.105491
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    More about this item

    Keywords

    Payment Card; Regulation; Interchange Fee; Fintech; Banks; Financial Conglomerates;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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