Interchange Fees and Card Payments: A Cross-country Analysis

24 Pages Posted: 30 Jul 2021

Date Written: July 27, 2021

Abstract

We study the relationship between interchange fees and card transactions in a large panel of countries and assess the impact of the Interchange Fee Regulation, introduced in 2015 in the European Union, on card usage. For our purposes, we take advantage of a newly assembled dataset covering almost 50 countries in the last decade and carry out two econometric exercises. Firstly, we estimate the relationship between card transactions per capita and average interchange fees by means of a panel estimator including both country and year fixed-effects, thus exploiting the broad heterogeneity across countries over time. Our results point toward a negative and significant relationship between the number and the growth rate of card-based transactions per capita and the level of interchange fees. Secondly, we adopt a difference-in-difference approach and compare the change in card payments in EU member countries (the treated group), before and after the implementation of the Interchange Fee Regulation in 2015, with that observed in a group of comparable countries (control group), which did not experience any change in interchange fee setting regulations. We find a strong and significant one-off impact of the Regulation immediately after its introduction and considerable propagation effects in the following years. Overall, we support the view that policy actions aiming at containing, but not eliminating, interchange fees can significantly contribute to the diffusion of electronic payments.

Keywords: interchange fees, regulation, card payments

JEL Classification: E42, G42

Suggested Citation

Ardizzi, Guerino and Scalise, Diego and Sene, Gabriele, Interchange Fees and Card Payments: A Cross-country Analysis (July 27, 2021). Bank of Italy Occasional Paper No. 628, Available at SSRN: https://ssrn.com/abstract=3896298 or http://dx.doi.org/10.2139/ssrn.3896298

Guerino Ardizzi

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Diego Scalise (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Gabriele Sene

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
102
Abstract Views
365
Rank
390,531
PlumX Metrics