The Effect of Regulatory Intervention in Two-Sided Markets: An Assessment of Interchange-Fee Capping in Australia

Chang Howard (), David Evans and Garcia Swartz Daniel D. ()
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Chang Howard: LECG, LLC
Garcia Swartz Daniel D.: LECG, LLC

Review of Network Economics, 2005, vol. 4, issue 4, 31

Abstract: We examine the impact to date of the Reserve Bank of Australia's decision to reduce interchange fees on credit cards in Australia by almost half. We find that, in the short run, issuers have recovered between 30 and 40 percent of the loss of interchange fees. Merchants have benefited from lower fees but it is questionable whether those benefits have been substantially passed on to their customers. The per-transaction price at the point of sale has not changed significantly and there is relatively little evidence thus far that the intervention has affected the volume of card transactions in Australia.

Date: 2005
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DOI: 10.2202/1446-9022.1080

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