An empirical analysis of debit card interchange fee regulation: Evidence from Brazil
This paper presents an empirical analysis of the introduction, in October 2018, of maximum thresholds (“caps”) on debit card interchange fees for domestic payment cards in Brazil. We investigate the behavior of card issuers’ revenues from debit and credit card interchange fees, the merchant discount...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Elsevier
2023-03-01
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| Series: | Latin American Journal of Central Banking |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S2666143822000321 |
| _version_ | 1827986977686814720 |
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| author | Daniel Tavares de Castro Emerson Erik Schmitz Monique de Abreu Azevedo |
| author_facet | Daniel Tavares de Castro Emerson Erik Schmitz Monique de Abreu Azevedo |
| author_sort | Daniel Tavares de Castro |
| collection | DOAJ |
| description | This paper presents an empirical analysis of the introduction, in October 2018, of maximum thresholds (“caps”) on debit card interchange fees for domestic payment cards in Brazil. We investigate the behavior of card issuers’ revenues from debit and credit card interchange fees, the merchant discount rate (MDR) of debit transactions, debit and credit card usage, and debit card scheme fees paid by card issuers and acquirers after the cap. We find a gradual and increasing reduction in the MDR, from 6.0% in 2018Q4 to 22.8% in 2020Q1. Additionally, we observe a statistically significant difference between debit and credit card MDR in 2019Q4 and 2020Q1. The cap reduces card issuers’ earnings from the debit card interchange fee proportionally to the cut but does not affect similar revenues from credit cards. Overall, there is no evidence that the regulation of the debit card interchange fee changes the dynamics of debit card usage or that it changes debit card scheme fees. |
| first_indexed | 2024-04-09T23:39:46Z |
| format | Article |
| id | doaj.art-b9570919d63d4402ba4f6b358df5740c |
| institution | Directory Open Access Journal |
| issn | 2666-1438 |
| language | English |
| last_indexed | 2024-04-09T23:39:46Z |
| publishDate | 2023-03-01 |
| publisher | Elsevier |
| record_format | Article |
| series | Latin American Journal of Central Banking |
| spelling | doaj.art-b9570919d63d4402ba4f6b358df5740c2023-03-19T04:38:32ZengElsevierLatin American Journal of Central Banking2666-14382023-03-0141100078An empirical analysis of debit card interchange fee regulation: Evidence from BrazilDaniel Tavares de Castro0Emerson Erik Schmitz1Monique de Abreu Azevedo2Department of Competition and Financial Market Structure, Central Bank of Brazil, Brazil, Head of Division, PhD in Finance and Quantitative Methods at University of BrasiliaDepartment of Competition and Financial Market Structure, Central Bank of Brazil, Brazil, Head of Division, PhD in Finance at Tilburg UniversityDepartment of Competition and Financial Market Structure, Central Bank of Brazil, Brazil, Coordinator, PhD in Finance and Quantitative Methods at University of Brasilia; Corresponding author.This paper presents an empirical analysis of the introduction, in October 2018, of maximum thresholds (“caps”) on debit card interchange fees for domestic payment cards in Brazil. We investigate the behavior of card issuers’ revenues from debit and credit card interchange fees, the merchant discount rate (MDR) of debit transactions, debit and credit card usage, and debit card scheme fees paid by card issuers and acquirers after the cap. We find a gradual and increasing reduction in the MDR, from 6.0% in 2018Q4 to 22.8% in 2020Q1. Additionally, we observe a statistically significant difference between debit and credit card MDR in 2019Q4 and 2020Q1. The cap reduces card issuers’ earnings from the debit card interchange fee proportionally to the cut but does not affect similar revenues from credit cards. Overall, there is no evidence that the regulation of the debit card interchange fee changes the dynamics of debit card usage or that it changes debit card scheme fees.http://www.sciencedirect.com/science/article/pii/S2666143822000321interchange feedebit cardregulatory interventionmerchant discount rate |
| spellingShingle | Daniel Tavares de Castro Emerson Erik Schmitz Monique de Abreu Azevedo An empirical analysis of debit card interchange fee regulation: Evidence from Brazil Latin American Journal of Central Banking interchange fee debit card regulatory intervention merchant discount rate |
| title | An empirical analysis of debit card interchange fee regulation: Evidence from Brazil |
| title_full | An empirical analysis of debit card interchange fee regulation: Evidence from Brazil |
| title_fullStr | An empirical analysis of debit card interchange fee regulation: Evidence from Brazil |
| title_full_unstemmed | An empirical analysis of debit card interchange fee regulation: Evidence from Brazil |
| title_short | An empirical analysis of debit card interchange fee regulation: Evidence from Brazil |
| title_sort | empirical analysis of debit card interchange fee regulation evidence from brazil |
| topic | interchange fee debit card regulatory intervention merchant discount rate |
| url | http://www.sciencedirect.com/science/article/pii/S2666143822000321 |
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