Access pricing, data externalities and sub-acquirers in payment markets

Jose Aurazo
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Jose Aurazo: Banco Central de Reserva del Perú

No 2024-011, Working Papers from Banco Central de Reserva del Perú

Abstract: This paper analyses how the introduction of sub-acquirers affects the pricing and market structure in the payment market. When the sub-acquirers and acquirers compete in the same downstream market, the acquirer allows socially desirable entry as they can extract total efficiency gains through the access fee paid by sub-acquirers. However, when large data externalities and bargaining power of sub-acquirers are introduced, the acquirer has incentives to deter entry due to imperfect rent extraction. Separately, when the sub-acquirers enter niche markets, the acquirer obtains extra profits, and thus has no incentives to foreclose.

Keywords: Access pricing; Data externalities; Digital payments; Interchange fees; Subacquirers; Two-sided markets (search for similar items in EconPapers)
JEL-codes: G21 L11 L4 L5 (search for similar items in EconPapers)
Date: 2024-12
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