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Interchange Fees in Various Countries: Developments and Determinants

Interchange Fees in Various Countries: Developments and Determinants. Antitrust Activity in Card-Based Payment Systems FRBNY Conference, September 15-16, 2005 New York, NY Stuart E. Weiner and Julian Wright Federal Reserve Bank of Kansas City National University of Singapore.

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Interchange Fees in Various Countries: Developments and Determinants

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  1. Interchange Fees in Various Countries: Developments and Determinants Antitrust Activity in Card-Based Payment Systems FRBNY Conference, September 15-16, 2005 New York, NY Stuart E. Weiner and Julian Wright Federal Reserve Bank of Kansas City National University of Singapore

  2. Global Interchange Fees • A number of issues and controversies currently surround credit and debit card interchange fees throughout the world • Countries examined: Australia, Canada, Denmark, EU cross-border, Mexico, Netherlands, Spain, Sweden, UK, U.S.

  3. Global Interchange Fees • Central message: Interchange fee arrangements vary considerably across countries. While existing theory provides insight into fee levels and movements, much remains to be explained. A number of complex and interrelated factors, many country-specific, play a role.

  4. Credit Cards • Summarized in Table 1 (handout) • IFs are set under a variety of arrangements • In most countries, IFs have declined or are declining, often due to regulation or regulatory threat • Industry participants and public authorities in virtually all of these countries have dealt with, or are currently discussing, IF or related issues and controversies

  5. Signature-based Debit Cards • Summarized in Table 2 (handout) • Signature-based debit cards have an important presence in a few countries, e.g., Spain, the U.S. • Essentially nonexistent in other countries, e.g., Canada, Denmark, Netherlands • IFs have tended to decline in most countries in recent years • Numerous countries facing various issues

  6. PIN-based Debit Cards • Summarized in Table 3 (handout) • PIN-based debit cards have large presence in many European countries as well as in Australia, Canada, and the U.S. • Variety of institutional features and practices across countries • IF movements have shown varying patterns • A number of PIN debit issues under discussion

  7. Public Authority Involvement • Summarized in Table 4 (handout) • Virtually all central banks have general oversight responsibility for the payments systems of their respective countries • In most countries, however, specific IF and other payment competition issues fall under the jurisdiction of competition (regulatory and antitrust) authorities, e.g., Canada, Denmark, EU, Netherlands, Spain, Sweden, UK, U.S. • Exceptions: Reserve Bank of Australia, Banco de México

  8. Determinants • Balancing considerations • Shifting revenues to issuers • Merchant and inter-system competition • Preliminary empirical evidence

  9. Determinants • Work in progress: Hayashi/Weiner • Case studies for Australia, Netherlands, UK, U.S. • Attempt to match theory with practice • Theoretical literature summarized in Table 5 (handout)

  10. Contact Information • Stuart E. Weiner • stuart.e.weiner@kc.frb.org • Julian Wright • jwright@nus.edu.sg

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