The Economics and Regulation of Payment Card Interchange Fees

Jun 09, 2010Jun 10, 2010
Willard InterContinental 1401 Pennsylvania Ave NW Washington, DC 20004

This event is co-hosted by the The International Center for Law and Economics and the Mercatus Center at George Mason University.

This conference will bring together legal and economic experts—authors and interpreters of this literature—with the policy community to distill the academic literature and to discuss the implications of this literature for the ongoing legislative and policy debates surrounding the regulation of interchange fees and credit card markets more broadly.  

Payment cards are widely used by consumers today, accounting for nearly a third of all consumer transactions in the US.  The payment systems that facilitate these transactions are complex, comprised of millions of consumers, thousands of banks, millions of merchants and a host of intermediary entities that facilitate the processing of card payments.  Without a penny in her pocket, a consumer today can walk into almost any store, hotel, or restaurant in the world and walk out with goods or services.  A consumer can buy a car with a credit card; without one, she might not even be able to rent a car.

At the heart of the system is a controversial fee—the interchange fee—usually charged by a consumer’s bank to a merchant’s bank in order to facilitate a payment card transaction.  Defenders of the fee argue that it plays a critical role in allowing card issuers to persuade individuals to carry the card brand and merchants to accept it.  Without the interchange fee, the evolution from a paper-based payments system to a more efficient electronic system—particularly one incorporating not only a payment function but also a credit function—would be dramatically impaired and both consumer and merchant benefits would be largely undermined.  

But merchants claim that the fee, even if necessary, is excessive, totaling billions of dollars a year more than the direct administrative costs of operating payment card systems—the only costs these merchants believe they should bear.  Based on these claims, some merchants have supported the regulation of interchange fees, at both the federal and state levels, and have engaged in a pervasive and heated campaign to build public and political support behind their efforts.  

This conference schedule will include a lively, moderated discussion of the central issues in the debate and how they will—and should—play out on the political stage.  And, we will also host a session by noted economic and legal experts, discussing the policy relevance today of some of the classic literature informing the current debate.  Our day concludes with lunch and a keynote presentation from Todd Zywicki of George Mason University Law School on “The Economics of Payment Card Interchange Fees and the Limits of Regulation.”

Conference Speakers include:

Thomas Brown, O'Melveny & Myers LLP
Sujit Chakravorti, Federal Reserve Bank of Chicago
Thomas Durkin, Former Senior Economist, Federal Reserve Board
Mike Konczal, Roosevelt Institute
Geoffrey Manne, International Center for Law and Economics
Megan McArdle, Atlantic Monthly
Tim Muris, former Chairman, Federal Trade Commission
Felix Salmon, Reuters
Steven Semeraro, Thomas Jefferson University
Fred Smith, Competitive Enterprise Institute
Joshua Wright, George Mason University Law School

View the program agenda here.

View The Economics Of Payment Card Interchange Fees And The Limits Of Regulation here.

To register for this conference, please register below or contact Megan Gandee at or by phone at 703.993.4967.