Interchange fees in various countries : developments and determinants

Debit cards ; Credit cards

The use of prepaid cards for banking the poor

Prepaid products can become an effective instrument for banking the poor, as they can be used for collecting microdeposits and so operate as a low-cost account. Prepaid platforms have characteristics that make them especially useful for developing low-cost microfinance business models. Indeed, customers using prepaid systems do not need bank accounts or debit or credit cards. Prepaid issuers do not need to develop or invest in new technologies, as this mechanism can be used on a range of platforms, including PCs, mobile phones, hand-held and set-top boxes. Furthermore, prepaid products are specially designed for offering services demanded by the poor, such as micropayments, microdeposits and even microcredits. Lastly, they allow users to monitor their cash flow by receiving statements (some providers offer this feature online, others provide physical statements) or accessing balances through PCs, mobile phones, hand-held and set-top boxes. Besides collecting microdeposits, prepaid products (or SVCs as they are called in the United States) offer other services that can be very valuable for serving the unbanked population. As explained in this paper, prepaid products generally lack the identification and credit requirements that effectively bar millions of individuals from opening traditional bank accounts, especially in the United States. Moreover, prepaid products can be purchased and reloaded at a growing number of locations other than bank branches, such as check cashers, convenience stores and other retailers. Prepaid instruments can also provide immediate availability of funds at a cost that, in some cases, is lower than other alternatives for unbanked consumers. Also, prepaid products are difficult to overdraw, thus reducing the likelihood of unexpected fees. Lastly, many prepaid issuers offer some sort of bill pay option, especially branded cards that enable signature-based transactions, and a significant number of them offer remittances.Prepaid card; microdeposits; mobile phone; store value card; e-money; banking the poor;

Interchange fees in various countries: developments and determinants

Interchange fees and related issues in credit and debit card markets have been the focus of considerable attention in recent years. The academic community has begun to address the economics of these markets. Public officials have begun to address the policy implications of developments in these markets. Meanwhile, these markets continue to experience dynamic change as credit, and especially debit, transactions account for an ever-growing share of overall payments. This paper provides an overview of interchange fee developments and issues in a number of countries. It also presents a preliminary analysis of some possible contributing factors. The principal conclusion of the paper is that interchange arrangements vary considerably across countries, and while existing economic theory provides some insight into fee levels and movements, much remains to be explained. A number of complex and interrelated factors, many country-specific, play a role in interchange developments.Credit cards ; Debit cards

Interorganizational Networks : the Issue of Global Sovereignty

One of the most striking phenomena of the past decade has been the internationalisation of service firms (Tersen and Bricout, 1996). Previously considered “un-exportable” (Segal-Horn, 1993), they have proven day after day that they have the necessary characteristics to undertake an international development, and even a globalization of their offering systems (Vandermerwe, 1989 ; Campbell and Verbeke, 1994 ; Gadrey, 1994 ;). Retail banking and financial services are remarkable illustrations of this phenomenon (Michalet, 1985 ; Andreff, 1995). And bank cards in the first place. However, management scholars have been slow in reacting to this challenge. Focused on industry (and surprisingly enough on the automotive industry), the scholars have rather neglected the emerging field of international service firms. This Research gap has motivated our project on the international deployment of services. The field study we have selected is relative to the bank card organizations. This industry illustrates the functioning of service firms as political institutions. A striking example relates to the emergence and development of international standards bodies, specifically in the area of Internet payments. We are faced here with the construction of a transnational regulation. This paper brings twofold a contribution. On one hand, it enriches the interpretation of a very important, peculiar and potentially generic research object, through the lenses of the translation theory. On the other hand, it has key managerial implications regarding « political » strategies with regard to positioning as a regulatory institution. Discussion follows on the consequences of these agencies' activities for business enterprises.

Competition and credit and debit card interchange fees: a cross-country analysis

This paper seeks to provide a bridge between the theoretical and empirical literatures on interchange fees. Specifically, the paper confronts theory with practice by asking, to what extent do existing models of interchange fees match up with actual interchange fee practices in various countries? For each of four countries—Australia, the Netherlands, the UK, and the United States—models that “best” fit the competitive and institutional features of that country’s payment card market are identified, and the implications of those model are compared to actual practices. Along what competitive dimensions is there alignment? Along what competitive dimensions is there not alignment? What country-specific factors appear to be important in explaining deviations from theoretical predictions? The results suggest that a theory applicable in one country may not be applicable in another, and that similar interchange fee arrangements and regulations may well have different implications in different countries.Credit cards ; Debit cards ; Competition