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Incentives at the counter: An empirical analysis of surcharging card payment and payment behaviour in the Netherlands

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Listed author(s):
  • Wilko Bolt
  • Nicole Jonker
  • Corry van Renselaar

Abstract

In card payment systems, no-surcharge rules prohibit merchants from charging consumers extra for card payments. However, Dutch retailers are allowed to surcharge consumers for their debit card use. This allows an empirical analysis of the impact of surcharging on the demand for debit card services, and the effect of removing the no-surcharge rule on card acceptance by retailers and on consumer payment choice. Based on consumer and retailer survey data, our analysis shows that surcharging steers consumers away from using debit cards towards cash. Half of the observed difference in debit card payment shares across retailers can be explained by this surcharge effect. First calculations suggest that removing the surcharge on debit card payments in the Netherlands may induce considerable social cost savings of more than EUR 100 million in the long run.

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Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 196.

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Date of creation: Dec 2008
Handle: RePEc:dnb:dnbwpp:196
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Keywords: survey data; retail payments; no-surcharge rule; cost efficiency;

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Find related papers by JEL classification:
  • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
  • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
  • G20 - Financial Economics - - Financial Institutions and Services - - - General

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  1. Humphrey, David B., 2004. "Replacement of cash by cards in US consumer payments," Journal of Economics and Business, Elsevier, vol. 56(3), pages 211-225.
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