Debit card interchange fees generally lead to cash-promoting cross-subsidisation

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dc.contributor Bank of Finland Leinonen, Harry 2014-09-22T07:57:52Z 2014-09-22T07:57:52Z 2011
dc.identifier.isbn 978-952-462-661-3
dc.identifier.issn 1456-6184
dc.description Ilmestynyt myös European Competition Journal 7 ; 3 ; 2011.
dc.description.abstract Cards and cash are competing payment instruments at point-of-sale. The twosided market platform theory, based on general benefit assumptions, supports the use of multilateral interchange fees for card payments as a means of promoting the use of cards. However, analysis of the issue from the concrete processing cost viewpoint leads to the opposite conclusion: collection of debit card interchange fees by issuers results in subsidisation of cash and so actually promotes the use of cash instead of cards. Banks use card interchange revenues to cover cash distribution costs. For merchants, interchange fees increase payment costs and thus reduce the possibilities to pass through to customers the cost savings flowing from card efficiency. Moreover, because of high merchant fees due to high interchange fees, merchants are also more reluctant to accept payment cards. An MIF based on the tourist level approach will result in all parties being indifferent between cash and cards and thereby delay the realisation of the cost benefits of increased debit card usage. The resent actions of authorities to increase transparency and reduce cross-subsidisation seem to point in the right direction towards more efficient resource allocation in payments.
dc.format.extent 39 s.
dc.language.iso eng
dc.subject kustannukset
dc.subject maksukortit
dc.subject maksut
dc.subject maksuvälineet
dc.subject SP
dc.subject RP
dc.subject käteinen
dc.subject siirtohinnat
dc.subject pankkikortit
dc.title Debit card interchange fees generally lead to cash-promoting cross-subsidisation
dc.type Sarjajulkaisu
dc.identifier.urn URN:NBN:fi:bof-20140807213 Bank of Finland Research Discussion Papers
dc.series.year 2011
dc.series.number 3/2011
dc.series.sortingnumber 0003 8.1.2011
dc.identifier.doi 10.5235/174410511798716657
dc.description.publication Published in European Competition Journal, Volume 7, No 3, December 2011: 527-557

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