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Access pricing, data externalities and sub-acquirers in payment markets

Author

Listed:
  • Jose Aurazo

    (Banco Central de Reserva del Perú
    Bank for International Settlements)

Abstract

This paper analyses how the introduction of sub-acquirers affects the pricing and market structure in the payment market. When the sub-acquirers and acquirers compete in the same downstream market, the acquirer allows socially desirable entry as they can extract total efficiency gains through the access fee paid by sub-acquirers. However, when large data externalities and bargaining power of sub-acquirers are introduced, the acquirer has incentives to deter entry due to imperfect rent extraction. Separately, when the sub-acquirers enter niche markets, the acquirer obtains extra profits, and thus has no incentives to foreclose.

Suggested Citation

  • Jose Aurazo, 2024. "Access pricing, data externalities and sub-acquirers in payment markets," Working Papers 2024-011, Banco Central de Reserva del Perú.
    • Handle: RePEc:rbp:wpaper:2024-011
    as

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    File URL: https://www.bcrp.gob.pe/docs/Publicaciones/Documentos-de-Trabajo/2024/documento-de-trabajo-011-2024.pdf
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    More about this item

    Keywords

    Access pricing; Data externalities; Digital payments; Interchange fees; Subacquirers; Two-sided markets;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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