Juan, Iranzo and Pascual, Fernández and Gustavo, Matías and Manuel, Delgado (2012): The effects of the mandatory decrease of interchange fees in Spain.
Download (1759Kb) | Preview
On 2 December 2005, a government-enforced Agreement to reduce Interchange levels for a five-year period (2006-2010) was signed by the main Spanish merchant associations and card schemes. The main results of the mandated Agreement have disturbed the necessary balance of the electronic payment system market and have damaged the majority of participants and society as a whole. The reduction in interchange fees was 3,329.96 million euros by the end of 2010. Although statistical correlations can never prove causality, and can be attributed to several factors involved, the average annual decline of more than 830 million has harmed consumers by raising cardholder fees and reducing card benefits, without any improvement of services being taken into account. But to different extents this is also true for the acquiring and issuing banks, which have been forced to protect themselves against loss of income, and even for merchants and card schemes which signed the Agreement. There is no evidence that prices have been lowered or the fulfilment of other objectives of the Agreement. This has altered the four-party system, which favours other less participatory systems and reduces incentives to innovate to improve the quality and safety of the service. In addition, it has also slowed the replacement of cash, which is more expensive and slower, less efficient and less transparent. This has benefitted the black economy, not income tax revenue or general welfare. As such, the main incentives to boost electronic payments as instruments of innovation, transparency and cost reduction have suffered. Nor has there been an increase in trade volumes, which have also been affected by the crisis and the increase in defaults, which has led to higher commissions.
|Item Type:||MPRA Paper|
|Original Title:||The effects of the mandatory decrease of interchange fees in Spain|
|English Title:||The effects of the mandatory decrease of interchange fees in Spain|
|Keywords:||interchange fees, payment systems, mandatory decrease, effects, competition, economic literature,acquiring banks,higher commissions, issuing banks, merchants, consumers,users,improvement of services, innovation, transparency and cost reduction,|
|Subjects:||D - Microeconomics > D4 - Market Structure and Pricing > D40 - General
D - Microeconomics > D6 - Welfare Economics > D60 - General
|Depositing User:||Matías Gustavo|
|Date Deposited:||06. Dec 2012 13:48|
|Last Modified:||12. Feb 2013 08:47|
Stillman Robert, William Bishop, Kyla Malcolm and Nicole Hidebrandt, Regulatory Intervention in the Payment Card Industry by the Reserve Bank of Australia. Analysis and evidence”. CRA International. London, (2008): April 28.
Börestam, Ann, and Heiko Schmiedel, Interchange fees in card payments. Occasional paper series Nº 131, European Central Bank, September 2011, p. 10.
Evans, David, and Schmalensee, Richard, The Economics of Interchange Fees and Their Regulation: An Overview, AEI-Brookings Joint Center for Regulatory Studies, Related Publication 05-12, May 2005.
Evans, S. D and Mateus, A, How changes in payment card interchange fees affect consumers fees and merchant prices: an economic analysis with applications to the European Union, 2011.
Wright, Julian, The determinants of optimal interchange fees in payment systems, Journal of Industrial Economics Vol. 52, Issue 1 (March 2004), pp. 1-26.
Calvano, Emilio , Note on the Economic Theory of Interchange, Economic Theory of Interchange Fees. Comment Submitted to the Federal Reserve Board Regarding the Implementation of the Durbin Amendment. February 22, .2011.
Dot.econ, Costly cash, International evidence on cost of making payments, Sept 2011
Evans, David S., Litan, Robert E., Schmalensee, Richard, The Economic Principles for Establishing Reasonable Regulation of Debit- Card Interchange Fees that Could Improve Consumer Welfare. Submission to the Board of Governors of the Federal Reserve System, February 22, 2011.
Federal Reserve System.12 CFR Part 235 Debit Card Interchange Fees and Routing. Proposed Rules. [Regulation II; Docket No. R–1404]. RIN 7100–AD63. Federal Register. Vol. 75, No. 248. 2010.
Bradford, Terri, and Hayashi, Fumiko, Developments in interchange fees in the United States and abroad, Federal Reserve Bank of Kansas City, April 2008.
Rochet, Jean-Charles, and Tirole, Jean, Two-Sided Markets: A Progress Report, Rand Journal of Economics 37 (3), 645-667, 2006,
Terceiro, José B. and Matías, Gustavo: Digitalismo, Tauros 2001, Madrid
Verdier, Marianne, Interchange fees in payment card systems: a survey of the literature, Journal of Economic Surveys, Volume 25, Issue 2, pages 273–297, April 2011
Schmalensee, Richard, Payment Systems and Interchange Fees, NBER Working Paper No. 8256, Issued in April 2001,NBER Program(s):IO ; Payment Systems And Interchange Fees, Journal of Industrial Economics, 2002, v50 (2 June), 103-122.
Brits and Winder, Payments are no free lunch, De Nederlandsche Bank. Occasional Studies Vol. 3, No 2, p. 5
Verdier , Marianne, Interchange Fees and Ineficiencies in the Substitution between Payment Cards and Cash, March 29, 2010.
Carbó Valverde, Santiago; Humphrey, David, and López del Paso, Rafael, The Falling Share of Cash Payments in Spain, Moneda y Crédito, Revista de Economía, nº 217, 2003, pag 167-190.
Carbó Valverde, Santiago; Chakravorti, Sujit, and Rodríguez-Fernandez, Francisco., The Costs and Benefits of Interchange Fee Regulation: An Empirical Investigation, FRB de Chicago, Documento de Trabajo N º 2009-11
Corral de la Mata, Daniel. Nuevo enfoque del negocio de tarjetas bancarias en el sistema español de medios de pago, Facultad de Ciencias Jurídicas y Sociales, Universidad Rey Juan Carlos, Doctoral thesis, (2009), pp. 141.
Capgemini, World Payments Report , 2011, p. 10.
ECB 2011, Statistical Data Warehouse
BCE: Towards an integrated European card payments market. Monthly Bulletin, January 2012.
Comisión Nacional de Mercado de Telecomunicaciones. Informe sobre el comercio electrónico en España a través de entidades de medios de pago, IV Quarter.
Eurostat: Internet Usage in 2010 – Households and Individuals, nº 50/2010.
Bank of Spain, Memorias anuales de supervisión 2006, 2007, 2008, 2009, 2010 and 2011.
National Statistics Institute (INE)
Tatum,¿Cómo está evolucionando el negocio de los medios de pago?¿Por qué se ha reabierto la guerra de tarjetas? (How is the business of payment methods evolving? Why has the card war been restarted?), September, 2007