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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

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

global interchange fees
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.
global interchange fees3
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.
credit cards
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
signature based debit cards
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
pin based debit cards
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
public authority involvement
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
determinants
Determinants
  • Balancing considerations
  • Shifting revenues to issuers
  • Merchant and inter-system competition
  • Preliminary empirical evidence
determinants9
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)
contact information
Contact Information
  • Stuart E. Weiner
    • stuart.e.weiner@kc.frb.org
  • Julian Wright
    • jwright@nus.edu.sg