The Impact Of The Us Debit Card Interchange Fee Regulation On Consumer Welfare
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Author | : David Sparks Evans |
Publisher | : |
Total Pages | : 60 |
Release | : 2013 |
Genre | : Banks and banking |
ISBN | : |
The cost to merchants of taking payment on debit cards declined by more than 7 billion dollars annually as a result of the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, while the effective cost to issuers of providing debit card services to consumers increased by a corresponding amount. This paper reports an event-study analysis of stock prices to determine the impact on consumers of the Durbin Amendment. Did consumers gain more from cost savings passed on by merchants, in the form of lower prices and better services, than they lost from cost increases passed on by banks, in the form of higher prices or less service? We find that consumers lost more on the bank side than they gained on the merchant side. Our estimate is that, based on the expectations of investors, the present discounted value of the losses for consumers as a result of the implementation of the Durbin Amendment is between 22 and 25 billion dollars.
Author | : David S. Evans |
Publisher | : |
Total Pages | : 60 |
Release | : 2013 |
Genre | : |
ISBN | : |
The cost to merchants of taking payment on debit cards declined by more than $7 billion annually as a result of the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, while the effective cost to issuers of providing debit card services to consumers increased by a corresponding amount. This paper reports an event-study analysis of stock prices to determine the impact on consumers of the Durbin Amendment. Did consumers gain more from cost savings passed on by merchants, in the form of lower prices and better services, than they lost from cost increases passed on by banks, in the form of higher prices or less service? We find that consumers lost more on the bank side than they gained on the merchant side. Our estimate is that, based on the expectations of investors, the present discounted value of the losses for consumers as a result of the implementation of the Durbin Amendment is between $22 and $25 billion.
Author | : United States. Congress. House. Committee on Financial Services. Subcommittee on Financial Institutions and Consumer Credit |
Publisher | : |
Total Pages | : 380 |
Release | : 2011 |
Genre | : Business & Economics |
ISBN | : |
Author | : Todd J. Zywicki |
Publisher | : |
Total Pages | : 64 |
Release | : 2014 |
Genre | : |
ISBN | : |
Fresh off of the most substantial national liquidity crisis of the last generation and the enactment of sweeping credit card regulation in the form of the Credit CARD Act, Congress continues to deliberate, with a continuing drumbeat of support from lobbyists, a set of new regulations for credit card companies. These proposals, offered in the name of consumer protection, seek to constrain the setting of “interchange fees” - transaction charges integral to payment card systems - through a range of proposed political interventions. This article identifies both the theoretical and actual failings of such regulation. Payment cards are a secure, inexpensive, welfare-increasing payment mechanism largely unlike any other in history. Rather than increasing consumer welfare in any meaningful sense, interchange fee legislation represents an attempt by some merchants to shift costs away from their businesses and onto card issuing banks and cardholders. In particular, bank-issued credit cards offer a dramatic improvement in the efficiency and availability of consumer credit by shifting credit risk from merchants onto banks in exchange for the cost of the interchange fee - currently averaging less than 2% of purchase value. Merchants' efforts to cabin these fees would harm not only consumers but also the merchants themselves as commerce would depend more heavily on less-efficient paper-based payment systems. The consequence of interchange fee legislation, as Australia's experiment with such regulation demonstrates, would be reduced access to credit, higher interest rates for consumers, and the return of the much-loathed annual fee for credit cards. Interchange fee regulation threatens to constrain credit for consumers and small businesses as the American economy begins to convalesce from a serious “credit crunch,” and should be accordingly rejected.
Author | : United States. Congress. House. Committee on Energy and Commerce. Subcommittee on Commerce, Trade, and Consumer Protection |
Publisher | : |
Total Pages | : 124 |
Release | : 2006 |
Genre | : Business & Economics |
ISBN | : |
Author | : United States. Congress. House. Committee on Financial Services |
Publisher | : |
Total Pages | : 288 |
Release | : 2010 |
Genre | : Business & Economics |
ISBN | : |
Author | : Jakub Górka |
Publisher | : Springer |
Total Pages | : 196 |
Release | : 2018-11-29 |
Genre | : Business & Economics |
ISBN | : 3030030415 |
Interchange fees have been the focal point for debate in the card industry, among competition authorities and policy makers, as well as in the economic literature on two-sided markets and on the regulation of market failures. This book offers insight into the economics of interchange fees. First, it explains the nature of two-sided markets/platforms/networks and elaborates on four-party schemes and on the rationale behind interchange fees according to Baxter’s model and its later refinements. It also includes the debate about the optimum level of interchange fees and its determination (“tourist test”), and presents the original framework for assessing the impact of interchange fee regulatory reductions for the market participants: consumers, merchants, acquirers, issuers, and card organisations. The framework addresses three areas of concern in reference to the transmission channels of interchange fee reductions (pass-through) and the card scheme domain (triangle: payment organisation, issuer, acquirer). The book discusses the effects of regulatory interchange fee reductions in Australia, USA, Spain, and, most specifically, Poland. It will be of interest to policy makers, card and payments industry practitioners, academics, and students.
Author | : Zhu Wang |
Publisher | : |
Total Pages | : 24 |
Release | : 2013 |
Genre | : |
ISBN | : |
The debit card interchange fee regulation introduced by the Durbin Amendment to the Dodd-Frank Act went into effect in October 2011. The regulation limits the maximum permissible interchange fee that a covered issuer can collect from merchants for a debit card transaction. In this article, we review the regulation's first-year impact on different players in the debit card market. We also discuss how the regulation may affect payments efficiency.
Author | : Bin Grace Li |
Publisher | : International Monetary Fund |
Total Pages | : 48 |
Release | : 2019-03-18 |
Genre | : Business & Economics |
ISBN | : 1484399625 |
It takes many years for more efficient electronic payments to be widely used, and the fees that merchants (consumers) pay for using those services are increasing (decreasing) over time. We address these puzzles by studying payments system evolution with a dynamic model in a twosided market setting. We calibrate the model to the U.S. payment card data, and conduct welfare and policy analysis. Our analysis shows that the market power of electronic payment networks plays important roles in explaining the slow adoption and asymmetric price changes, and the welfare impact of regulations may vary significantly through the endogenous R&D channel.
Author | : Oz Shy |
Publisher | : |
Total Pages | : 31 |
Release | : 2014 |
Genre | : |
ISBN | : |
In October 2011, new rules governing debit card interchange fees became effective in the United States. These rules limit the maximum permissible interchange fee that an issuer can charge merchants for a debit card transaction. Using new data from the Boston Fed's 2012 Diary of Consumer Payment Choice, this paper provides simple calculations that identify the transaction values by consumer expenditure category for which interchange fees became higher and lower under the new rules.