Regulating Payment-Card Fees: International Best Practices and Lessons for Costa Rica

ICLE White Paper 2022-05-25

12 Pages Posted: 9 Jun 2022

See all articles by Julian Morris

Julian Morris

International Center for Law and Economics; Reason Foundation; IEA, Institute of Economic Affairs, U.K.

Date Written: May 25, 2022


In 2020, the Legislative Assembly of Costa Rica passed Legislative Decree 9831, which granted the Central Bank of Costa Rica (BCCR) authority to regulate payment-card fees. BCCR subsequently developed a regulation that set maximum fees for acquiring and issuing banks, which came into force Nov. 24, 2020. In BCCR’s November 2021 ordinary review of those price controls, the central bank set out a framework to limit further the fees charged on domestic cards and to introduce limits on fees charged on foreign cards.

This brief considers the international experience with interchange and acquisition fees, reviewing both theoretical and empirical evidence. It finds that international best practices require that payment networks be considered dynamic two-sided markets, and therefore, that assessments account for the effects of regulation on both sides of the market: merchants and consumers. In contrast, BCCR’s analysis focuses primarily on static costs that affect merchants, with little attention to the effects on consumers, let alone the dynamic effects. Consequently, BCCR’s proposed maximum interchange and acquisition fees would interfere with the efficient operation of the payment-card market in ways that are likely to harm consumers. Specifically, losses by issuing and acquiring banks are likely to be passed on to consumers in the form of higher banking and card fees, and less investment in improvements. Less wealthy consumers are likely to be hit hardest.

Based on the evidence available, international best practices entail: (1) As far as possible, allowing the market to determine interchange fees and acquisition fees; (2) Acknowledging that payment networks are two-sided markets in which one side (usually merchants) typically subsidizes the other side, thereby increasing system effectiveness; (3) Not benchmarking fees, especially against countries that have price controls in place; and (4) Not imposing price controls on fees on foreign cards.

Keywords: Interchange fee, acquisition fee, MDR, two-sided markets, payment card, credit card, debit card, payment network, price control, price cap, Costa Rica

JEL Classification: D04, D11, D12, D18, D62, D63, D72, K23, L51, L89, O38

Suggested Citation

Morris, Julian, Regulating Payment-Card Fees: International Best Practices and Lessons for Costa Rica (May 25, 2022). ICLE White Paper 2022-05-25, Available at SSRN: or

Julian Morris (Contact Author)

International Center for Law and Economics ( email )

2117 NE Oregon St. Ste 501
Portland, OR 97232
United States

HOME PAGE: http://

Reason Foundation ( email )

United States


IEA, Institute of Economic Affairs, U.K.

2 Lord North Street
London SW1P 3LB
United Kingdom

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