Merchant Acceptance of Payment Cards: ‘Must Take’ or ‘Wanna Take’?

29 Pages Posted: 17 May 2017

See all articles by David Bounie

David Bounie

Telecom ParisTech

Abel Francois

Strasbourg University, LARGE; EM Strasbourg Business School; Telecom ParisTech

Leo Van Hove

Vrije Universiteit Brussel (VUB)

Date Written: March 14, 2017

Abstract

In recent years, regulators in various parts of the world have capped interchange fees on debit and credit cards. The justification for the caps rests to a large extent on the argument that these cards have, for certain merchants, become must-take cards rather than ‘wanna-take cards’. That is, there are merchants who accept payment cards not because they bring net convenience benefits but out of fear of losing profitable business to card-accepting competitors. This paper presents an original approach that allows to quantify, for the first time, the relative importance of the two motivations. We find, for the case of France in 2008, that the must-take phenomenon effectively exists, but that it applies to only 5.8-19.8 per cent of the card-accepting merchants and to a mere 3.9-13.5 per cent of all retailers.

Keywords: payment cards, merchants, two-sided markets, network externalities, must-take cards, interchange fees

JEL Classification: E42, L81, D4

Suggested Citation

Bounie, David and Francois, Abel and Van Hove, Leo, Merchant Acceptance of Payment Cards: ‘Must Take’ or ‘Wanna Take’? (March 14, 2017). Available at SSRN: https://ssrn.com/abstract=2969862 or http://dx.doi.org/10.2139/ssrn.2969862

David Bounie (Contact Author)

Telecom ParisTech ( email )

46 rue Barrault
F-75634 Paris, Cedex 13
France

Abel Francois

Strasbourg University, LARGE ( email )

47 avenue de la foret Noire
Strasbourg, 67000
France

HOME PAGE: http://abelfrancois.wordpress.com/information/

EM Strasbourg Business School ( email )

PEGE
61 avenue de la Forêt Noire
Strasbourg, 67000
France

HOME PAGE: http://abelfrancois.wordpress.com/information/

Telecom ParisTech

46, rue Barrault
Paris Cedex 13, F-75634
France

Leo Van Hove

Vrije Universiteit Brussel (VUB) ( email )

Department of Applied Economics (APEC)
Pleinlaan 2
Brussels, B-1050
Belgium
+32 2 629 21 25 (Phone)
+32 2 629 20 60 (Fax)

HOME PAGE: http://research.vub.ac.be/applied-economics/members

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