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The Impact Of The U.S. Debit-Card Interchange Fee Regulation On Consumer Welfare

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Listed:
  • David S. Evans
  • Howard Chang
  • Steven Joyce

Abstract

The cost to U.S. merchants of taking payment on debit cards declined by more than $7 billion annually as a result of the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, while the effective cost to issuers of providing debit-card services to consumers increased by a corresponding amount. This article reports an event-study analysis of stock prices to determine the impact on U.S. consumers of the Durbin Amendment. Did consumers gain more from cost savings passed on by merchants, in the form of lower prices and better services, than they lost from cost increases passed on by banks, in the form of higher prices or less service? We find that consumers lost more on the bank side than they gained on the merchant side. Our estimate is that, based on the expectations of investors, the present discounted value of losses for consumers as a result of the implementation of the Durbin Amendment is between $22 billion and $25 billion.

Suggested Citation

  • David S. Evans & Howard Chang & Steven Joyce, 2015. "The Impact Of The U.S. Debit-Card Interchange Fee Regulation On Consumer Welfare," Journal of Competition Law and Economics, Oxford University Press, vol. 11(1), pages 23-67.
    • Handle: RePEc:oup:jcomle:v:11:y:2015:i:1:p:23-67.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhu032
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    References listed on IDEAS

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    1. George L. Mullin & Joseph C. Mullin & Wallace P. Mullin, 1995. "The Competitive Effects of Mergers: Stock Market Evidence from the U.S. Steel Dissolution Suit," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 314-330, Summer.
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    Cited by:

    1. Egor A. Krivosheya, 2018. "Evaluating Efficient Multilateral Interchange Fees: Evidence from End-User Benefits," HSE Working papers WP BRP 66/FE/2018, National Research University Higher School of Economics.
    2. Bita Shabgard & Javier Asensio, 2023. "The price effects of reducing payment card interchange fees," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 14(2), pages 189-221, June.

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    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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