Credit Card Payment Processing in Electronic Commerce: An Analysis of the Bucket Pricing Strategy

Yoris Au
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Yoris Au: The University of Texas at San Antonio

No 91, Working Papers from College of Business, University of Texas at San Antonio

Abstract: Credit cards have been the dominant payment method for the electronic commerce retail industry. However, online retailers, especially the small to medium ones, continue to be disadvantaged by the seemingly arbitrary bucket pricing strategy implemented by the credit card processing companies. We address the following research question: “Can the credit card processors continue to economically justify the use of bucket pricing structure, especially considering the increased competition within the industry and from competing payment alternatives?” We use an economic model as a basis of our analyses and discussions.

Keywords: Credit card payments; credit card processing; bucket pricing; tiered pricing; electronic commerce; online retailers. (search for similar items in EconPapers)
JEL-codes: M15 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2009-06-23
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