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Incentives at the counter: An empirical analysis of surcharging card payment and payment behaviour in the Netherlands

Wilko Bolt (), Nicole Jonker and Corry van Renselaar

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: In card payment systems, no-surcharge rules prohibit merchants from charging consumers extra for card payments. However, Dutch retailers are allowed to surcharge consumers for their debit card use. This allows an empirical analysis of the impact of surcharging on the demand for debit card services, and the effect of removing the no-surcharge rule on card acceptance by retailers and on consumer payment choice. Based on consumer and retailer survey data, our analysis shows that surcharging steers consumers away from using debit cards towards cash. Half of the observed difference in debit card payment shares across retailers can be explained by this surcharge effect. First calculations suggest that removing the surcharge on debit card payments in the Netherlands may induce considerable social cost savings of more than EUR 100 million in the long run.

Keywords: survey data; retail payments; no-surcharge rule; cost efficiency (search for similar items in EconPapers)
JEL-codes: D12 D61 G20 (search for similar items in EconPapers)
Date: 2008-12
New Economics Papers: this item is included in nep-mkt
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Journal Article: Incentives at the counter: An empirical analysis of surcharging card payments and payment behaviour in the Netherlands (2010) Downloads
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