James M. Lyon - First Vice President
Published June 1, 2006 | June 2006 issue
A dispute is growing between banks that issue debit and credit cards, and merchants that accept these cards from their customers. At its heart is the interchange fee, the fraction of each transaction that the issuer retains. Retailers contend that the fee unfairly cuts into their revenue.
Over 50 lawsuits have been filed against card associations and issuing banks. Calls for regulatory intervention have increased in the United States and abroad.
But economic research on card networks (and other "two-sided markets") is at an early stage, and too little is currently known to either settle the dispute or justify intervention.
The Interchange Fee Debate: Issues and Economics [complete article]