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Community bank access to payment card networks : has it become more expensive?

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  • Fumiko Hayashi

Abstract

The payment industry is undergoing significant change. Consolidations among payment networks and processors have been seen in every payment service area and technological advances provide incentives for even larger financial institutions to outsource their transaction processing. As a result, a smaller number of networks or processors are competing more vigorously for larger financial institutions. In doing so, volume-based pricing or volume discounts are commonly practiced in the industry. This paper examines whether the change in fee structure of networks and processors make community banks’ access to the payment card networks more expensive. Although community banks pay relatively higher fees per transaction to the networks than their larger counterparts, their fees per transaction have not increased for most of the payment services. Processing fees that community banks pay to their processors have likely decreased. In addition, new processing arrangements have evolved so that community banks can take advantage of the change in processors fee structure.

Suggested Citation

  • Fumiko Hayashi, 2003. "Community bank access to payment card networks : has it become more expensive?," Payments System Research Working Paper PSR WP 03-02, Federal Reserve Bank of Kansas City.
  • Handle: RePEc:fip:fedkpw:psrwp03-02
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    File URL: http://www.kansascityfed.org/publicat/psr/rwp/CmtyBkAccess.pdf
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    Cited by:

    1. Fumiko Hayashi, 2012. "The new debit card regulations: initial effects on networks and banks," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV.
    2. Richard J. Sullivan, 2012. "The Federal Reserve’s reduced role in retail payments: implications for efficiency and risk," Economic Review, Federal Reserve Bank of Kansas City, issue Q III.

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    Keywords

    Payment systems;

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