Ardizzi, Guerino (2013): Card versus cash: empirical evidence of the impact of payment card interchange fees on end users’ choice of payment methods. Published in: Journal of Financial Market and Infrastructures , Vol. 1, No. 4 (27 June 2013): pp. 73-105.
Preview |
PDF
MPRA_paper_48088.pdf Download (568kB) | Preview |
Abstract
Interchange fees in card payments are a mechanism to balance costs and revenues between banks for the joint provision of payment services. However, such fees represent a relevant input cost used as a reference price for the final fee charged to the merchants, who may be reluctant to accept cards and induce the cardholder to withdraw cash. In this paper, we empirically verify for the first time the effect of the interchange fee on the decision to withdraw cash and compare it with that of paying with payment cards, considering a balanced panel data set of Italian issuing banks. Finally, results show that there is a positive correlation between the cash usage and the level of the interchange fees. Accordingly, regulation of the multilateral interchange fee level may be an effective tool in reducing cash payments at the point of sale, although there is no clear evidence that a zero interchange fee rate (or a close-to-zero rate) would be optimal.
Item Type: | MPRA Paper |
---|---|
Original Title: | Card versus cash: empirical evidence of the impact of payment card interchange fees on end users’ choice of payment methods |
English Title: | Card versus cash: empirical evidence of the impact of payment card interchange fees on end users’ choice of payment methods |
Language: | English |
Keywords: | MIF, interchange fee, payment card, ATM, POS, cash |
Subjects: | E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E41 - Demand for Money E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E42 - Monetary Systems ; Standards ; Regimes ; Government and the Monetary System ; Payment Systems E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply ; Credit ; Money Multipliers G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L14 - Transactional Relationships ; Contracts and Reputation ; Networks |
Item ID: | 48088 |
Depositing User: | Guerino Ardizzi |
Date Deposited: | 08 Jul 2013 09:21 |
Last Modified: | 27 Sep 2019 00:50 |
References: | Alvarez, F., and Lippi. F. (2009). Financial innovation and transactions demand for cash.Econometrica, 77(2), 363–402. Ardizzi, G., and Coppola, G. (2002). The Italian case study: interchange fee, market structure and cost efficiency in the retail payment system. Conference on “The Economics of Payment Networks”.Working Paper, IDEI Université de Toulouse I. Banca d’Italia (1998). Provision number 23 of 8 October 1998 – PAGOBANCOMAT. Banca d’Italia (2012a). The social cost of payment instruments in Italy. Institutional Issues (November). Banca d’Italia (2012b). Annual Report 2011. Baxter,W.F. (1983). Bank interchange of transactional paper: legal and economic perspectives. Journal of Law and Economics 26(3), 541–588. Beck, N., and Katz, J. (2004). Time-series–cross-section issues.Working Paper. Bolt,W., and Schmiedel, H. (2013). Pricing of payment cards, competition, and efficiency: a possible guide for SEPA. Annals of Finance 9(1), 5–25. Bolt,W., Humphrey, D., and Uittenbogaard, R. (2008).Transaction pricing and the adoption of electronic payments: a cross-country comparison. International Journal of Central Banking 4(1), 89–123. Bolt, W., Jonker, N., and van Renselaar, C. (2010). Incentives at the counter: an empirical analysis of surcharging card payments and payment behaviour in the Netherlands. Journal of Banking and Finance 34(8), 1738–1744. Börestam, A., and Schmiedel, H. (2011). Interchange fee in card payments. Occasional Paper, European Central Bank. Breusch, T. S., and Pagan A. R. (1980). The Lagrange multiplier test and its application to model specifications in econometrics. Review of Economic Studies 47(1), 239–253. Cameron, C., and Trivedi, K. P. (2005). Microeconometrics: Methods and Applications. Cambridge University Press. Chakravorti, S., Fernandez, F. R., and Valverde, S.C. (2009). Regulating two-sided markets: an empirical investigation.Working Paper, Federal Reserve Bank of Chicago. Chang, H., Evans, D., and Garcia-Swartz, D. (2005). The effect of regulatory intervention in two-sided markets: an assessment of interchange-fee capping in Australia. Review of Network Economics 4(4). Chernozhukov, V., and Hansen, C. (2008). Instrumental variable quantile regression: a robust inference approach. Journal of Econometrics 142(1), 379–398. Coppola, G. (2011). Le surcharge sulle carte di pagamento. Studi e Note di Economia 16(3), 323–340. Doria, M. (2010). L’obiettivo di riduzione del contante: la facoltà di applicare “sconti” per l’acquisto di beni o servizi; il divieto di “surcharge”. In La Nuova Disciplina dei Servizi di Pagamento. Giappichelli, Torino. European Central Bank (2006). The Eurosystem’s view of a SEPA for cards. Occasional Paper. European Central Bank (2012). Payment statistics. Report incorporating 2011 data. ECB, September. European Commission (2010). Decision relating to roceedings under Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the EEA Agreement. Case COMP/39.398, Visan MIF. European Commission (2012). Toward an integrated market for card, internet and mobile payments. Green Paper, COM(2011) 941. Evans, D. S., and Schmalensee, R. L. (1999). Paying with Plastic. MIT Press, Cambridge, MA. Gans, J. S. (2007). Evaluating the impact of the payment system reforms. Submission to the Reserve Bank of Australia’s Payment System Board’s 2007–08 Review of Payment System Reforms. Gans, J. S., and King, S. P. (2003). The neutrality of interchange fees in payment systems. Topics in Economic Analysis and Policy 3, Article 1. Greene, W. (2000). Econometric Analysis. Prentice-Hall, Englewood Cliffs, NJ. Hansen, B. (2012). Econometrics. University of Wisconsin. Hayes, R. (2007). An econometric analysis of the impact of the RBAs credit card reforms. Mimeo, Melbourne Business School. Hoechle, D. (2007). Robust standard errors for panel regressions with cross-sectional dependence. Stata Journal 7(3), 281–312. Humphrey, D. B., Pulley, L. B., and Vesala, J. M. (1996). Cash, paper, and electronic payments: a cross-country analysis. Journal of Money, Credit and Banking 8(4, Part 2), 914–939. ITM (2000). Study regarding the effects of the abolition of the non-discrimination rule in Sweden. European Commission Directorate General for Competition. Jones, P., and Jones, C. (2006). Explaining differing European MCS levels. Papeles de Economia Espanola. Jonker, N. (2011). Card acceptance and surcharging: the role of costs and competition. Working Paper 300, De Nederlandsche Bank. Koenker, R. (2004). Quantile regression for longitudinal data. Journal of Multivariate Analysis 91(1), 74–89. Leinonen, H. (2007). On the efficiency of multilateral interchange fees (MIFs): how to price cash and cards in order to promote payment efficiency. Bank of Finland Online, no. 4. Financial Markets and Statistics. Leinonen, H. (2011). Debit card interchange fees generally lead to cash-promoting crosssubsidisation. Bank of Finland Online, no. 3. Financial Markets and Statistics. Lippi, F., and Secchi, A. (2009). Technological change and the households’ demand for currency. Journal of Monetary Economics 56, 222–230. Pesaran, M. H. (2004). General diagnostic tests for cross section dependence in panels. Working Paper, University of Cambridge. Racine, J. S. (2008). Nonparametric econometrics: a primer. Foundations and Trends in Econometrics 3(1), 1–88. Rochet, J.-C. (2007). Understanding interchange fees. Mimeo, Toulouse School of Economics and IDEI. Rochet, J.-C., and Tirole, J. (2002). Cooperation among competitors: some economics of payment card associations. RAND Journal of Economics 33(4), 549–570. Rochet, J.-C., and Tirole, J. (2003). Platform competition in two-sided markets. Journal of the European Economic Association 1(4), 990–1029. Rochet, J.-C., andTirole, J. (2011).Must-take cards:merchant discounts and avoided costs. Journal of the European Economic Association 9(3), 462–495. Royston, P., and Cox, N. J. (2005).A multivariable scatterplot smoother. Stata Journal 5(3), 405–412. Schmiedel, H., Kostova, G., and Ruttenburg,W. (2012).The social and private cost of retail payments: a European perspective. Occasional Paper, European Central Bank. Stata Technical Bulletin (1995). Stata Technical Bulletin, STB-25 (May). Stix, H. (2004). How do debit cards affect cash demand? Survey data evidence. Empirica 31(2–3), 93–115. Visa International (2001). Visa International Service Association. Mimeo. Wooldridge, J. M. (2002). Econometric Analysis of Cross Section and Panel Data. MIT Press, Cambridge, MA. Zenger, H. (2011). Perfect surcharging and the tourist test interchange fee. Journal of Banking and Finance 35(10), 2544–2546. Research Paper |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/48088 |