The Economics of Payment Cards

This paper provides a snapshot of the state of the literature on payment cards, particularly from the perspective of interchange fees and the economics literature on two-sided markets. The paper aims to integrate a wide range of theoretical papers with the relevant empirical research and important policy questions. We address not only the accomplishments of the research so far, but also the most important limitations in the existing theory and gaps where future research should be directed, as well as what are the important empirical questions that can be potentially answered with the right data. In so doing, we point to directions for new theoretical and empirical work to bridge the gap between economics and policy