This paper presents a model of competing payment schemes. Unlike previous work on generic two-sided markets, the model allows for the fact that in a payment system users on one side of the market (merchants) compete to attract users on the other side (consumers who may use cards for purchases)....

Payment card networks, such as Visa, require merchants' banks to pay substantial "interchange" fees to cardholders' banks, on a per transaction basis. This paper shows that a network's profit-maximizing fee induces an inefficient price structure, over-subsidizing card usage and over-taxing...

In a payment card association such as Visa, each time a consumer pays by card, the bank of the merchant (acquirer) pays an interchange fee (IF) to the bank of the cardholder (issuer) to carry out the transaction. This paper studies the determinants of socially and privately optimal IFs in a card...