Interchange Fees and Payment Card Networks: Economics, Industry Developments, and Policy Issues

Posted: 2 Jul 2021

See all articles by Ron Borzekowski

Ron Borzekowski

Yale University

Elizabeth K. Kiser

Board of Governors of the Federal Reserve System

Mark D. Manuszak

Board of Governors of the Federal Reserve System

Robin A. Prager

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: 2009

Abstract

In many countries around the world, electronic card-based payments have been replacing older types of payments at a rapid rate. In the United States, use of both debit cards and credit cards has been rising rapidly, while check volumes have been declining. The increased use of electronic payment methods has generated a number of public policy debates. One prominent debate concerns interchange fees. This paper is intended to provide background for understanding the interchange fee debate. The paper describes the operation of a typical payment card system, presents a summary of the economic theory underlying interchange fees, and discusses various developments in the U.S. payment cards industry, as well as legal and regulatory developments abroad. The paper concludes with a discussion and critical evaluation of a number of potential policy interventions.

Suggested Citation

Borzekowski, Ron and Kiser, Elizabeth K. and Manuszak, Mark D. and Prager, Robin, Interchange Fees and Payment Card Networks: Economics, Industry Developments, and Policy Issues (2009). FEDS Working Paper No. 2009-23, Available at SSRN: https://ssrn.com/abstract=3877830

Ron Borzekowski (Contact Author)

Yale University ( email )

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New Haven, CT CT 06520
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Elizabeth K. Kiser

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Mark D. Manuszak

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Robin Prager

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-3643 (Phone)
202-452-3819 (Fax)

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