The Economics of Payment Card Interchange Fees and the Limits of Regulation

By Todd Zywicki on March 17, 2011

Dr. Todd Zywicki, Director at Global Economics Group, provides a detailed economic analysis of the regulation of interchange fees on consumers, merchants and banks. In The Economics of Payment Card Interchange Fees and the Limits of Regulation, (ICLE Financial Regulatory Program White Paper Series, George Mason University Law and Economics Research Paper Series, 2010), Dr. Zywicki demonstrates that neither economic theory nor empirical evidence support the claim that interchange fees are too high. As Dr. Zywicki concludes, it is difficult to imagine an intervention as poorly-supported by evidence or theory and that would be more damaging to consumers, the economy, competition, and innovation than artificial efforts to restrict interchange fees. The Economics of Payment Card Interchange Fees and the Limits of Regulation