On the efficiency of multilateral interchange fees (MIFs) : how to price cash and cards in order to promote payment efficiency?

Abstract

1 Introduction 5 2 Payment services are transportation services using fund transfer systems 7 3 Costs of transportation of funds 11 4 Pricing mechanisms of payment services 14 5 Transparent surcharging or embedded merchant payment costs 17 6 The impact of cross-subsidisation, embedded prices, MIFs and different cost structures 20 6.1 Scenario 1): transparent cost-based pricing without an MIF 21 6.2 Scenario 2): mostly bank subsidised payment costs in a win-win situation without MIF 21 6.3 Scenario 3): mostly bank subsidised payment costs in a win-lose situation with MIF 23 6.4 Scenario 4): the impact of an oversized MIF 25 7 Authority reactions to perceived oversized MIFs 27 8 Embedded versus transparent prices 29 9 Summary 31