The Role of Interchange Fees in Two-Sided Markets: An Empirical Investigation on Payment Cards

Santiago Carbo Valverde, Sujit Chakravorti and Francisco Rodríguez Fernández ()

The Review of Economics and Statistics, 2016, vol. 98, issue 2, 367-381

Abstract: We study the impact of reductions in interchange fees on payment card services. We find that consumer and merchant acceptance and transaction volumes increased when interchange fees were reduced. Our results suggest that a 10% reduction in the rate of decline per quarter in the average interchange fee by an acquirer resulted in a rate of increase in merchant acceptance per quarter of up to 1.4%. In addition, a 10% increase in the rate of interaction of merchant acceptance and the total number of cards increased the rate of quarterly issuer transaction volumes up to 1.7%.

Keywords: consumer choice; merchant adoption; payment cards (search for similar items in EconPapers)
JEL-codes: D53 G21 L11 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (13)

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