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Interchange Fees in Various Countries: Developments and Determinants

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Author Info
Stuart E. Weiner ()
Julian Wright (National University of Singapore)

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Abstract

Interchange fees and related issues in payment card markets have been the focus of considerable attention recently. The academic community and public officials have begun to scrutinize these markets. Meanwhile, these markets continue to experience dynamic change as card payments account for an ever-growing share of overall payments. This paper provides an overview of interchange fee developments and issues, and also presents a preliminary analysis of some possible contributing factors. The principal conclusion of the paper is that interchange arrangements vary considerably across countries, and while existing economic theory provides some insight into this market, much remains to be explained.

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Publisher Info
Article provided by Concept Economics in its journal Review of Network Economics.

Volume (Year): 4 (2005)
Issue (Month): 4 (December)
Pages: 290-323
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Handle: RePEc:rne:rneart:v:4:y:2005:i:4:p:290-323

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Related research
Keywords: Interchange fees; No-surcharge; Competition; Regulation;

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References listed on IDEAS
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.:
  1. ROCHET, Jean-Charles & TIROLE, Jean, 2005. "Two-Sided Markets : A Progress Report," IDEI Working Papers 275, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
    • Jean-Charles Rochet Author-Email: rochet@cict.fr Author-Workplace-Name: IDEI, University of Toulouse & Jean Tirole Author-Email: tirole@cict.fr Author-Workplace-Name: IDEI, University of Toulouse, 2006. "Two-Sided Markets: A Progress Report," RAND Journal of Economics, The RAND Corporation, vol. 37(3), pages 645-667, Autumn.
  2. Joshua Gans & Stephen King, 2003. "The Neutrality of Interchange Fees in Payment Systems," Topics in Economic Analysis & Policy, Berkeley Electronic Press, vol. 3(1), pages 1069-1069. [Downloadable!] (restricted)
  3. Sujit Chakravorti, 2003. "Theory of Credit Card Networks: A Survey of the Literature," Review of Network Economics, Concept Economics, vol. 2(2), pages 50-68, June. [Downloadable!]
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  4. ROCHET, Jean-Charles & TIROLE, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  5. Caillaud, Bernard & Jullien, Bruno, 2003. " Chicken & Egg: Competition among Intermediation Service Providers," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 309-28, Summer.
  6. David S. Evans, 2003. "Some Empirical Aspects of Multi-Sided Platform Industries," Review of Network Economics, Concept Economics, vol. 2(3), pages 191-209, September. [Downloadable!]
  7. Julian Wright, 2004. "The Determinants of Optimal Interchange Fees in Payment Systems," Journal of Industrial Economics, Blackwell Publishing, vol. 52(1), pages 1-26, 03. [Downloadable!] (restricted)
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  8. Schmalensee, Richard, 2002. "Payment Systems and Interchange Fees," Journal of Industrial Economics, Blackwell Publishing, vol. 50(2), pages 103-22, June. [Downloadable!] (restricted)
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  9. Jean-Charles Rochet, 2003. "The Theory of Interchange Fees: A Synthesis of Recent Contributions," Review of Network Economics, Concept Economics, vol. 2(2), pages 97-124, June. [Downloadable!]
  10. Evans, David & Schmalensee, Richard, 2005. "The Economics of Interchange Fees and Their Regulation: An Overview," Working papers 18181, Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
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  11. Jean-Charles Rochet & Jean Tirole, 2003. "An Economic Analysis of the Determination of Interchange Fees in Payment Card Systems," Review of Network Economics, Concept Economics, vol. 2(2), pages 69-79, June. [Downloadable!]
  12. Robert M. Hunt, 2003. "An Introduction to the Economics of Payment Card Networks," Review of Network Economics, Concept Economics, vol. 2(2), pages 80-96, June. [Downloadable!]
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  13. 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.
  14. Graeme Guthrie & Julian Wright, 2003. "Competing Payment Schemes," Departmental Working Papers wp0311, National University of Singapore, Department of Economics. [Downloadable!]
  15. 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. [Downloadable!]
  16. Mark Armstrong, 2005. "Competition in Two-Sided Markets," Industrial Organization 0505009, EconWPA. [Downloadable!]
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Full references

Cited by:
(explanations, 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.)

  1. Verdier, Marianne, 2006. "Retail Payment Systems: What can we Learn from Two-Sided Markets?," MPRA Paper 2606, University Library of Munich, Germany. [Downloadable!]
  2. James McAndrews & Zhu Wang, 2007. "Microfoundations of Two-sided Markets: The Payment Card Example," DNB Working Papers 128, Netherlands Central Bank, Research Department. [Downloadable!]
    Other versions:
  3. Wilko Bolt & Sujit Chakravorti, 2008. "Economics of Payment Cards: A Status Report," DNB Working Papers 193, Netherlands Central Bank, Research Department. [Downloadable!]
  4. Aysan, Ahmet Faruk & Müslim, Nusret Ahmet, 2006. "The Failure of Competition in the Credit Card Market in Turkey: The New Empirical Evidence," MPRA Paper 5483, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  5. James 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. [Downloadable!]
  6. Guido K. Schaefer, . "An Economic Analysis of the Single Euro Payments Area (SEPA)," FIW Working Paper series 011, FIW. [Downloadable!]
  7. Wilko Bolt & Sujit Chakravorti, 2008. "Economics of payment cards: a status report," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 15-27. [Downloadable!]
  8. Michael L. Katz, 2005. "What do we know about interchange fees and what does it mean for public policy? : commentary on Evans and Schmalensee," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City, issue May, pages 121-137. [Downloadable!]
  9. Wilko Bolt & Kimmo Soramäki, 2008. "Competition, bargaining power and pricing in two-sided markets," DNB Working Papers 181, Netherlands Central Bank, Research Department. [Downloadable!]
  10. Alan S. Frankel, 2005. "Interchange fees in various countries : developments and determinants : commentary on Weiner and Wright," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City, issue May, pages 51-64. [Downloadable!]
  11. Antoine Martin & Michael Orlando & David Skeie, 2006. "Payment networks in a search model of money," Staff Reports 263, Federal Reserve Bank of New York. [Downloadable!]
    Other versions:
  12. Zhu Wang, 2006. "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. [Downloadable!]
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