Interchange Fee Regulation and card payments: a cross-country analysis

Guerino Ardizzi (), Diego Scalise () and Gabriele Sene ()
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Guerino Ardizzi: Banca d'Italia
Diego Scalise: Banca d'Italia
Gabriele Sene: Banca d'Italia

No 628, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We study the relationship between interchange fees and card transactions in a large panel of countries and assess the impact of the Interchange Fee Regulation, introduced in 2015 in the European Union, on card usage. For our purposes, we take advantage of a newly assembled dataset covering almost 50 countries in the last decade and carry out two econometric exercises. Firstly, we estimate the relationship between card transactions per capita and average interchange fees by means of a panel estimator including both country and year fixed-effects, thus exploiting the broad heterogeneity across countries over time. Our results point toward a negative and significant relationship between the number and the growth rate of card-based transactions per capita and the level of interchange fees. Secondly, we adopt a difference-in-difference approach and compare the change in card payments in EU member countries (the treated group), before and after the implementation of the Interchange Fee Regulation in 2015, with that observed in a group of comparable countries (control group), which did not experience any change in interchange fee setting regulations. We find a strong and significant one-off impact of the Regulation immediately after its introduction and considerable propagation effects in the following years. Overall, we support the view that policy actions aiming at containing, but not eliminating, interchange fees can significantly contribute to the diffusion of electronic payments.

Keywords: Interchange fees; Regulation; card payments (search for similar items in EconPapers)
JEL-codes: E42 G2 (search for similar items in EconPapers)
Date: 2021-07
New Economics Papers: this item is included in nep-eec, nep-isf, nep-mac, nep-pay and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_628_21

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