INTERCHANGE FEES IN CREDIT AND DEBIT CARD MARKETS:
WHAT ROLE FOR PUBLIC AUTHORITIES?

Interchange fees, paid by merchants to credit and debit card issuers, are an integral part of the card transaction pricing structure. In many countries, these fees are set by credit and debit card networks, although there are some exceptions.

In Australia, the central bank is regulating interchange fees, while in several other countries, public officials are considering a more hands-on regulatory stance. In the United States, the issue is being addressed largely in the courtroom.

To enhance the understanding of issues surrounding interchange fees, the Federal Reserve Bank of Kansas City sponsored an international conference in 2005. The conference brought together many parties who have an interest in interchange fees, including industry participants, antitrust authorities, central bankers and academics, to consider several key questions.

A summary of the conference, authored by Barbara Pacheco, senior vice president at the Federal Reserve Bank of Kansas City, and Richard Sullivan, senior economist in the Bank’s Payment System Research department, is featured in the first quarter edition of the Bank’s Economic Review. The paper summarizes formal presentations and highlights contributions made by participants.

The article and full conference proceedings are available on the Bank’s Web site at www.KansasCityFed.org.

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