Overview of Recent Developments in the Credit Card Industry

FDIC Banking Review, Vol. 17, No. 3, 2005

14 Pages Posted: 17 Feb 2006

See all articles by Douglas Akers

Douglas Akers

Government of the United States of America - Division of Research and Statistics

Brian Lamm

Government of the United States of America - Division of Research and Statistics

Jay Golter

Government of the United States of America - Division of Research and Statistics

Martha Solt

Government of the United States of America - Division of Research and Statistics

Abstract

Since the 1980s, Visa U.S.A. (Visa) and Master-Card International (MasterCard), the bank-controlled credit card associations that together account for approximately 70 percent of today's credit card market, have been able to control the use of and access to their networks to the advantage of their bank members. Recently, however, the credit card industry has been changing: some merchants are now large enough to exert their own leverage, legal defeats have impeded the ability of credit card associations to control the market, and some participants have developed new arrangements and alliances that may be a prelude to further changes in the industry. This article surveys recent developments in an industry that is facing new competitive dynamics.

The article begins by describing the formation of the payment card industry and then its structure. The article continues by explaining the functioning of credit card networks: the various kinds of network models, and the significance of interchange fees in the most complex model. Next discussed are recent industry-altering litigation involving Visa and MasterCard, and significant aftereffects of the litigation. The article concludes by noting the main challenges facing the industry today.

Suggested Citation

Akers, Douglas and Lamm, Brian and Golter, Jay and Solt, Martha, Overview of Recent Developments in the Credit Card Industry. FDIC Banking Review, Vol. 17, No. 3, 2005. Available at SSRN: https://ssrn.com/abstract=882103

Douglas Akers (Contact Author)

Government of the United States of America - Division of Research and Statistics ( email )

550 Seventeenth Street, NW
Washington, DC 20057
United States

Brian Lamm

Government of the United States of America - Division of Research and Statistics ( email )

550 Seventeenth Street, NW
Washington, DC 20057
United States

Jay Golter

Government of the United States of America - Division of Research and Statistics ( email )

550 Seventeenth Street, NW
Washington, DC 20057
United States

Martha Solt

Government of the United States of America - Division of Research and Statistics ( email )

550 Seventeenth Street, NW
Washington, DC 20057
United States

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