The new debit card regulations: initial effects on networks and banks

Fumiko Hayashi

Economic Review, 2012, vol. 97, issue Q IV

Abstract: American consumers are using debit cards more than ever before, triggering key changes in the payment card industry and affecting how banks and merchants do business. ; Controversy has arisen as the industry raised the fees it charges on merchants for debit transaction processing?fees that merchants may pass on to consumers, affecting the prices that consumers pay for goods and services. Congress and the Justice Department have stepped in with rules to cap certain fees and promote competition among card networks. ; In this first article of two, Hayashi finds the new regulations and legal framework have caused distinct shifts in the revenues, incentives and market shares of both banks and card networks. Early signs suggest network competition among networks for merchants has risen, but the outlook for merchants and consumers may hinge on new revenue strategies adopted by the industry.

Date: 2012
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