Wednesday, January 21, 2009
Posted by D. Daniel Sokol
Fumiko Hayashi (Federal Reserve Bank of Kansas City) writes on The Economics of Payment Card Fee Structure: Policy Considerations of Payment Card Rewards.
ABSTRACT: This paper considers possible public policies that could improve efficiency and welfare distribution in the U.S. retail payments industry. Mainly, four options, i) encouraging competition; ii) allowing merchants to surcharge; iii) regulating merchant fees; and iv) regulating payment card rewards, are discussed, but each option has advantages and disadvantages. Any single option may not achieve the policymakers' objective; rather, combining several policy options may be required.