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Debit Card Interchange Fees Generally Lead to Cash-Promoting Cross-Subsidisation

Debit Card Interchange Fees Generally Lead to Cash-Promoting Cross-Subsidisation December 2011 European Competition Journal 527 Debit Card Interchange Fees DEBIT CARD INTERCHANGE FEES GENERALLY LEAD TO CASH-PROMOTING CROSS-SUBSIDISATION HARRY LEINoNEN* A. Intorduct Ion Consumers have to pay for purchases, and merchants can accept different kinds of payment instruments. Merchants have an interest in finding a mutually suitable instrument because otherwise certain purchases will not be realised. The main task of any instrument is to transfer funds from payer to payee, but one instrument may be more suitable or efficient than another in a given situation. However, the payment instruments in use share an existing payment market volume; for instance, when card volumes increase, the volumes of other instruments—most importantly cash—will decrease. The instrument selection and palette will not affect the total volume of payments, which is determined by the budget constraints for consumption. There is a variety of card products that can be used at point of sale (POS) instead of cash or cheque payments. These are generally categorised as debit cards or as one of two types of credit cards: charge cards and revolving credit cards. Today, debit cards are dominant in most national card payment markets. The card technology is also used to enhance cash distribution http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png European Competition Journal Taylor & Francis

Debit Card Interchange Fees Generally Lead to Cash-Promoting Cross-Subsidisation

European Competition Journal , Volume 7 (3): 31 – Dec 1, 2011

Debit Card Interchange Fees Generally Lead to Cash-Promoting Cross-Subsidisation

European Competition Journal , Volume 7 (3): 31 – Dec 1, 2011

Abstract

December 2011 European Competition Journal 527 Debit Card Interchange Fees DEBIT CARD INTERCHANGE FEES GENERALLY LEAD TO CASH-PROMOTING CROSS-SUBSIDISATION HARRY LEINoNEN* A. Intorduct Ion Consumers have to pay for purchases, and merchants can accept different kinds of payment instruments. Merchants have an interest in finding a mutually suitable instrument because otherwise certain purchases will not be realised. The main task of any instrument is to transfer funds from payer to payee, but one instrument may be more suitable or efficient than another in a given situation. However, the payment instruments in use share an existing payment market volume; for instance, when card volumes increase, the volumes of other instruments—most importantly cash—will decrease. The instrument selection and palette will not affect the total volume of payments, which is determined by the budget constraints for consumption. There is a variety of card products that can be used at point of sale (POS) instead of cash or cheque payments. These are generally categorised as debit cards or as one of two types of credit cards: charge cards and revolving credit cards. Today, debit cards are dominant in most national card payment markets. The card technology is also used to enhance cash distribution

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References (47)

Publisher
Taylor & Francis
Copyright
© 2011 Taylor and Francis Group, LLC
ISSN
1757-8396
eISSN
1744-1056
DOI
10.5235/ecj.v7n3.527
Publisher site
See Article on Publisher Site

Abstract

December 2011 European Competition Journal 527 Debit Card Interchange Fees DEBIT CARD INTERCHANGE FEES GENERALLY LEAD TO CASH-PROMOTING CROSS-SUBSIDISATION HARRY LEINoNEN* A. Intorduct Ion Consumers have to pay for purchases, and merchants can accept different kinds of payment instruments. Merchants have an interest in finding a mutually suitable instrument because otherwise certain purchases will not be realised. The main task of any instrument is to transfer funds from payer to payee, but one instrument may be more suitable or efficient than another in a given situation. However, the payment instruments in use share an existing payment market volume; for instance, when card volumes increase, the volumes of other instruments—most importantly cash—will decrease. The instrument selection and palette will not affect the total volume of payments, which is determined by the budget constraints for consumption. There is a variety of card products that can be used at point of sale (POS) instead of cash or cheque payments. These are generally categorised as debit cards or as one of two types of credit cards: charge cards and revolving credit cards. Today, debit cards are dominant in most national card payment markets. The card technology is also used to enhance cash distribution

Journal

European Competition JournalTaylor & Francis

Published: Dec 1, 2011

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