The Neutrality of Interchange Fees in Payment Systems

2003 ◽  
Vol 3 (1) ◽  
Author(s):  
Joshua S Gans ◽  
Stephen P King
Keyword(s):  
General Result ◽  
Credit Card ◽  
Public Debate ◽  
Perfect Competition ◽  
Payment Systems ◽  
Real Effects ◽  
Interchange Fees ◽  
The Us ◽  
Policy Solutions

Abstract There has been considerable public debate over the effect of interchange fees on credit card transactions. Regulators in Australia and Europe have argued that these fees can be set by banks to have an anticompetitive effect. In the US, it has been argued that these fees, together with a rule that prevents a surcharge for credit purchases, might create a cross subsidy between cash and credit customers. Academics have noted that, in particular circumstances, interchange fees have no real effects in the absence of such a no-surcharge rule. This paper demonstrates that the potential neutrality of interchange fees is a general result. We show that in the absence of a no surcharge rule or, alternatively, if there is perfect competition at the merchant level, interchange fees can be changed without leading to any real effects. This result does not depend on the degree or nature of competition at either the bank or the merchant level. We conclude that the elimination of no surcharge rules may provide practical policy solutions for authorities concerned about the level of interchange fees.

scholarly journals Approaches to Regulating Interchange Fees in Payment Systems

2003 ◽  
Vol 2 (2) ◽  
Author(s):  
Joshua S Gans ◽  
Stephen P. King
Keyword(s):  
Credit Card ◽  
Alternative Methods ◽  
Payment Systems ◽  
Interchange Fees ◽  
Payment Instruments ◽  
Reserve Bank ◽  
Regulatory Approach ◽  
Payments Systems ◽  
Australian Experience ◽  
Credit Card Usage

Significant attention worldwide has been paid to the regulation of credit card interchange fees. In part, this attention has followed concerns expressed about the level of these fees in Europe, the U.S. and Australia. The Reserve Bank of Australia recently conducted an extensive inquiry into the interchange fees associated with credit cards and has moved to regulate those fees. At the same time, research economists have considered determinants of the socially optimal interchange fee. In this paper, we use the Australian experience to highlight alternative methods of regulating interchange fees in payments systems. We use a simple model to derive a socially optimal interchange fee when merchants cannot freely set different prices for different payment instruments. We compare the socially optimal interchange fee from this model with those presented in the economics literature and show that most analyses capture a simple externality within the optimal fee. Credit card usage for a specific transaction is determined by the customer. But the customer does not bear the costs or receive the benefits that card usage imposes on the merchant. The optimal interchange fee internalises this externality. We then compare the theoretical optimal interchange fee with the approaches proposed in Australia, and show that the regulatory approach adopted by the Reserve Bank of Australia may be viewed as economically conservative in certain situations. Finally, we consider additional issues that will impinge on the regulation of interchange fees.

scholarly journals Externalities and Regulation in Card Payment Systems

2006 ◽  
Vol 5 (1) ◽  
Author(s):  
Jean-Charles Rochet ◽  
Jean Tirole
Keyword(s):  
Social Welfare ◽  
Consumer Surplus ◽  
Welfare Analysis ◽  
Payment Systems ◽  
Interchange Fees ◽  
Regulatory Approach ◽  
Innovative Thinking ◽  
Card Payment ◽  
Economic Thinking

The paper offers a roadmap to the current economic thinking concerning interchange fees. After describing the fundamental externalities inherent in payment systems and analysing merchant resistance to interchange fee increases and the associations' determination of this fee, it derives the externalities' implications for welfare analysis. It then discusses whether consumer surplus or social welfare is the proper benchmark for regulatory purposes. Finally, it offers a critique of the current regulatory approach, and concludes with a call for more novel and innovative thinking about how to reconcile regulators' concerns and the industry legitimate desire to perform its balancing act.

scholarly journals Our Economy is Evolving: Shouldn't the Way We Measure It Evolve Too?

2018 ◽  
Vol 3 (5) ◽  
Author(s):  
Marvin Ward ◽  
Bryan Kim ◽  
Lindsay Relihan ◽  
James Duguid
Keyword(s):  
Public Good ◽  
Administrative Data ◽  
Credit Card ◽  
Administrative Database ◽  
Data Series ◽  
Local Economies ◽  
The Public ◽  
The Us ◽  
Spending Growth ◽  
Economic Vitality

The Local Consumer Commerce Index is a measure of local economic activity parsed by a variety of consumer and merchant characteristics. By leveraging an administrative database of over 24 billion debit and credit card transactions made by over 64 million de-identified customers, this index from the JPMorgan Chase Institute addresses the lack of data series with sufficient spatiotemporal and demo/firmographic resolution to support tactical decision making in local economies. Each transaction carries the age and income of the consumer, the merchant size and type of product it sells, as well as the zip code of both.  Using these characteristics we construct a measure of year-over-year spending growth by consumers at merchants located in 14 major metropolitan areas in the US. The index data are screened and weighted to represent population-wide spending levels. This unique lens on local economies is freely provided to the public in accordance with the Institute’s mission of advancing the public good. We have also extended this data asset beyond its use for reporting and economic monitoring. One extension has been our research that measures intra-city demand.  By measuring the distance between where consumers live and the merchants at which they shop, we have lent nuance and granularity to policy discussions surrounding intra-city inequities in economic vitality. We hope to socialize the power of leveraging administrative data for the public good, in hopes that other administrative data-owners are encouraged to also furnish analyses based on their administrative data to help inform the public policy process.

Agents and Payment Systems in E-Commerce

2011 ◽  
pp. 99-103
Author(s):  
Sheng-Uei Guan
Keyword(s):  
Credit Card ◽  
Business Models ◽  
New Technologies ◽  
Mobile Internet ◽  
The Internet ◽  
Open Market ◽  
Payment Systems ◽  
Agent Based ◽  
Payment Scheme ◽  
Payment Schemes

An emerging outcome of the popularization of the Internet are electronic commerce and payment systems, which present great opportunities for businesses, reduce transaction costs, and provide faster transaction times. More research has been conducted with new technologies like mobile Internet used by business models (Baek & Hong, 2003). However, before using the Internet, it is essential to provide security in transferring monetary value over the Internet. A number of protocols have been proposed for these secure payment systems, including NetBill, NetCheque, Open Market, iKP, Millicent, SET (Sherift, 1998), E-Cash (Brands, 1995), NetCash, CAFÉ (Mjolsnes, 1997), EMV cards (Khu-Smith & Mitchell, 2002), etc. These systems are designed to meet diverse requirements, each with particular attributes. Automation and intelligence is another issue that poses challenges in the development of e-commerce. Agent technology has been incorporated into the area of e-commerce to provide automation and intelligence for the e-trade process. An agent is a software program capable of accomplishing tasks autonomously on behalf of its user. Agents must provide trustworthy consistency and fault tolerance to avoid eavesdropping and fraud. Also, agents should have roaming capability so as to extend their capability well beyond the limitations of owners’ computers. To meet these requirements, this chapter will discuss some related components under the SAFER (Secure Agent Fabrication, Evolution, and Roaming) architecture (Zhu & Guan, 2000) and propose an agent-based payment scheme for SAFER. Different types of electronic payment systems have been developed to meet its diverse requirements, which generally include integrity, authorization, confidentiality, availability, and reliability for security requirements (Asokan, 1997). Payment systems can be classified in a variety of ways according to their characteristics (Dahab & Ferreira, 1998), such as the exchange model (cash-like, check-like, or hybrid), central authority contact (online or offline), hardware requirements (specific or general), payment amounts (micropayment), etc. Among the available payment schemes in the market, E-Cash is one of the best in terms of security, flexibility, and full anonymity. E-Cash is a cash-like online system that uses electronic coins as tokens. E-Cash has unique advantages, such as flexibility, integrity, and full anonymity that cannot be found in electronic check and credit card based systems. It uses cryptographic techniques to provide full anonymity. The agent-based payment scheme for SAFER adopts some similar principles and concepts of E-Cash.

E-Commerce Agents and Payment Systems

2009 ◽  
pp. 822-828
Author(s):  
Sheng-Uei Guan
Keyword(s):  
Credit Card ◽  
Business Models ◽  
New Technologies ◽  
Mobile Internet ◽  
The Internet ◽  
Open Market ◽  
Payment Systems ◽  
Agent Based ◽  
Payment Scheme ◽  
Payment Schemes

An emerging outcome of the popularization of the Internet is the electronic commerce and payment systems, which present great opportunities for businesses, reduce transaction costs, and provide faster transaction time. Research has been conducted with new technologies, like mobile Internet used by business models (Baek & Hong, 2003). However, before using the Internet, it is essential to provide security in transferring monetary value over the Internet. Quite a number of protocols have been proposed for these secure payment systems, including NetBill, NetCheque, Open Market, iKP, Millicent, SET (Sherift & Serhrouchni, 1998), ECash (Brands, 1995), NetCash, CAFÉ (Mjolsnes & Michelson, 1997), EMV cards (Khu-Smith & Mitchell, 2002), and so forth. These systems are designed to meet diverse requirements, each with particular attributes. Automation and intelligence is another issue that poses challenges in the development of e-commerce. Agent technology has been incorporated into the area of e-commerce to provide automation and intelligence for the e-trade process. Agent is a software program, which is capable of accomplishing tasks autonomously on behalf of its user. Agents must provide highly trustworthy consistency and fault tolerance to avoid eavesdropping and fraud. Also, they should have roaming capability so as to extend their capabilities well beyond the limitations of owners’ computers. This article will discuss some related components under the Secure Agent Fabrication, Evolution, and Roaming (SAFER) architecture (Guan & Hua, 2003; Guan & Yang, 2004; Guan & Zhu, 2002; Ng, Guan, & Zhu, 2002; Zhu, Guan, Yang, & Ko, 2000) and propose an agent-based payment scheme for SAFER. Different types of electronic payment systems have been developed to meet their diverse requirements, which generally include integrity, authorization, confidentiality, availability, and reliability for security requirements (Asokan & Johnson, 1997). Payment systems can be classi- fied in a variety of ways according to their characteristics (Dahab & Ferreira, 1998), such as the exchange model (cash like, check like or hybrid), central authority contact (online or offline), hardware requirements (specific or general), payment amount (micropayment), and so forth. Among all the available payment schemes in the market, e-cash is one of the best in terms of security, flexibility, and full anonymity. E-cash is a cash-like online system that uses electronic coins as tokens. E-cash has its unique advantages, such as flexibility, integrity, and full anonymity that cannot be found in electronic check and credit card-based systems. It uses cryptographic techniques to provide full anonymity. The agent based payment scheme for SAFER adopts some similar principles and concepts of e-cash.

scholarly journals MAPPING LEGAL RESEARCH

2012 ◽  
Vol 71 (3) ◽  
pp. 651-676 ◽  
Author(s):  
Mathias M. Siems ◽  
Daithí Mac Síthigh
Keyword(s):  
Social Sciences ◽  
Social Science ◽  
Conceptual Framework ◽  
General Result ◽  
Law Schools ◽  
Legal Research ◽  
The Us ◽  
Micro Level ◽  
The Uk ◽  
The Relationship

This article aims to map the position of academic legal research, using a distinction between “law as a practical discipline”, “law as humanities” and “law as social sciences” as a conceptual framework. Having explained this framework, we address both the “macro” and “micro” level of legal research in the UK. For this purpose, we have collected information on the position of all law schools within the structure of their respective universities. We also introduce “ternary plots” as a new way of explaining individual research preferences. Our general result is that all three categories play a role within the context of UK legal academia, though the relationship between the “macro” and the “micro” level is not always straight-forward. We also provide comparisons with the US and Germany and show that in all three countries law as an academic tradition has been constantly evolving, raising questions such as whether the UK could or should move further to a social science model already dominant in the US.

The effects of monetary policy on input inventories

2019 ◽  
Vol 20 (1) ◽  
Author(s):  
Tiantian Dai ◽  
Xiangbo Liu ◽  
Wei Sun
Keyword(s):  
Monetary Policy ◽  
Aggregate Fluctuations ◽  
Search Frictions ◽  
Real Effects ◽  
Long Run ◽  
Extensive And Intensive Margins ◽  
Inventory Investment ◽  
The Us ◽  
Goods Market ◽  
Short Run

Abstract This paper explores both the long-run and short-run effects of monetary policy on input inventories in a search model with monetary propagation and two-stage production. Inventories arise endogenously due to search frictions. In the long run, we analytically show that an increase in the money growth rate has hump-shaped real effects on steady-state input inventory investment, input inventory-to-sales ratio as well as sales. These effects are driven by both the extensive and intensive margins in the finished goods market. We then calibrate the model to the US data to study the short-run effects of monetary policy. We first show that our model can reproduce the stylized facts of input inventories quite well and then find that input inventories amplify aggregate fluctuations over business cycles.

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