Interchange fees and payment card networks: economics, industry developments, and policy issues
In many countries around the world, electronic card-based payments have been replacing older types of payments at a rapid rate. In the United States, use of both debit cards and credit cards has been rising rapidly, while check volumes have been declining. The increased use of electronic payment methods has generated a number of public policy debates. One prominent debate concerns interchange fees. This paper is intended to provide background for understanding the interchange fee debate. The paper describes the operation of a typical payment card system, presents a summary of the economic theory underlying interchange fees, and discusses various developments in the U.S. payment cards industry, as well as legal and regulatory developments abroad. The paper concludes with a discussion and critical evaluation of a number of potential policy interventions.
|Date of creation:||2009|
|Date of revision:|
|Contact details of provider:|| Postal: 20th Street and Constitution Avenue, NW, Washington, DC 20551|
Web page: http://www.federalreserve.gov/
More information through EDIRC
|Order Information:||Web: http://www.federalreserve.gov/pubs/feds/fedsorder.html|
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.:
- Zhu Wang, 2008. "Market structure and credit card pricing: what drives the interchange?," Payments System Research Working Paper PSR WP 06-04, Federal Reserve Bank of Kansas City.
- 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.
- Jean-Charles Rochet & Jean Tirole, 2002. "Cooperation Among Competitors: Some Economics Of Payment Card Associations," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 549-570, Winter.
- Evans, David & Schmalensee, Richard, 2005.
"The Economics of Interchange Fees and Their Regulation: An Overview,"
18181, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- 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.
- Terri Bradford, 2008. "Developments in interchange fees in the United States and abroad," Payments System Research Briefing, Federal Reserve Bank of Kansas City, issue Apr.
- repec:reg:rpubli:105 is not listed on IDEAS
- Wright, Julian, 2003. "Optimal card payment systems," European Economic Review, Elsevier, vol. 47(4), pages 587-612, August.
- Geoffrey R. Gerdes, 2008. "Recent payment trends in the United States," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Oct, pages A75-A106.
- Schmalensee, Richard, 2002.
"Payment Systems and Interchange Fees,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 50(2), pages 103-22, June.
- Julian Wright, 2001.
"The Determinants of Optimal Interchange Fees in Payment Systems,"
- Julian Wright, 2004. "The Determinants of Optimal Interchange Fees in Payment Systems," Journal of Industrial Economics, Wiley Blackwell, vol. 52(1), pages 1-26, 03.
- Wright, Julian, 2001. "The Determinants of Optimal Interchange Fees in Payment Systems," Working Papers 176, Department of Economics, The University of Auckland.
- Paul W. Bauer & Daniel A. Littman, 2007. "Are consumers cashing out?," Economic Commentary, Federal Reserve Bank of Cleveland, issue Oct.
- Benjamin E. Hermalin & Michael L. Katz, 2006. "Your network or mine? The economics of routing rules," RAND Journal of Economics, RAND Corporation, vol. 37(3), pages 692-719, 09.
- Chakravorti Sujit & Roson Roberto, 2006.
"Platform Competition in Two-Sided Markets: The Case of Payment Networks,"
Review of Network Economics,
De Gruyter, vol. 5(1), pages 1-25, March.
- Sujit Chakravorti & Roberto Roson, 2004. "Platform competition in two-sided markets: the case of payment networks," Working Paper Series WP-04-09, Federal Reserve Bank of Chicago.
- Marc Rysman, 2006. "An Empirical Analysis of Payment Card Usage," Boston University - Department of Economics - Working Papers Series WP2006-002, Boston University - Department of Economics.
- Ann Kjos, 2007. "The merchant-acquiring side of the payment card industry; structure, operations, and challenges," Payment Cards Center Discussion Paper 07-12, Federal Reserve Bank of Philadelphia.
- Farrell Joseph, 2006. "Efficiency and Competition between Payment Instruments," Review of Network Economics, De Gruyter, vol. 5(1), pages 1-19, March.
- James J. McAndrews & Zhu Wang, 2012.
"The economics of two-sided payment card markets: pricing, adoption and usage,"
12-06, Federal Reserve Bank of Richmond.
- 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.
- Gans Joshua S & King Stephen P, 2003. "The Neutrality of Interchange Fees in Payment Systems," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-18, January.
- Guthrie, Graeme & Wright, Julian, 2003.
"Competing Payment Schemes,"
173, Department of Economics, The University of Auckland.
- repec:rje:randje:v:37:y:2006:3:p:692-719 is not listed on IDEAS
- Baxter, William F, 1983. "Bank Interchange of Transactional Paper: Legal and Economic Perspectives," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 541-88, October.
- repec:fip:fedgws:y:2008:i:oct:p:a75-a106:n:v.94 is not listed on IDEAS
- Geoffrey R. Gerdes & Jack K. Walton & May X. Liu & Darrel W. Parke, 2005. "Trends in the use of payment instruments in the United States," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Spr, pages 180-201.
- Fumiko Hayashi, 2004.
"A puzzle of card payment pricing : why are merchants still accepting card payments?,"
Payments System Research Working Paper
PSR WP 04-02, Federal Reserve Bank of Kansas City.
- Hayashi Fumiko, 2006. "A Puzzle of Card Payment Pricing: Why Are Merchants Still Accepting Card Payments?," Review of Network Economics, De Gruyter, vol. 5(1), pages 1-31, March.
- Elizabeth C. Klee, 2006. "Families' use of payment instruments during a decade of change in the U.S. payment system," Finance and Economics Discussion Series 2006-01, Board of Governors of the Federal Reserve System (U.S.).
- repec:fip:fedgws:v.94:x:1 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:fip:fedgfe:2009-23. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marlene Vikor)
If references are entirely missing, you can add them using this form.