Showing archive for: “Payments & Payment Networks”
No Free Lunch at Linney’s Pizza
A pizza shop wants lower debit-card fees. Fair enough. But if it wins, the tab may not land where diners expect. It could reshape administrative law, narrow the Federal Reserve’s discretion, and make ordinary checking accounts more expensive. That is what is at stake in Linney’s Pizza, LLC v. Board of Governors of the Federal ... No Free Lunch at Linney’s Pizza
Robin Hood Carries a Credit Card
The “reverse Robin Hood” hypothesis is back, wearing a fresh econometric hat and carrying a very large number. The claim is familiar: credit card rewards programs let affluent cardholders pick the pockets of poorer consumers who pay with cash or debit. The new estimate is punchier. In a recent working paper, a group of academics ... Robin Hood Carries a Credit Card
The Exit Door Theory of Consumer Finance
Consumer protection often begins with a simple question: Can the consumer walk away? If the answer is no—because switching is hard, data are locked up, markets are fragmented, or new competitors cannot enter—then the problem is not just weak consumer protection. It is weak competition. That is the frame for a deceptively basic question: How ... The Exit Door Theory of Consumer Finance
From Competition to Exclusion: Can Discounts Go Too Far?
When does a discount cross the line from competition to exclusion? That question now sits before a federal district court weighing the U.S. Justice Department’s (DOJ) antitrust case against Visa Inc. and its debit-card business, where Visa holds a 60% share. In the waning days of the Biden administration, on Sept. 24, 2024, the DOJ ... From Competition to Exclusion: Can Discounts Go Too Far?
The Myth of the Unwanted Internet
In a recent podcast, New York Times journalist Ezra Klein hosted lawyer Tim Wu and writer Cory Doctorow for a conversation titled “We Didn’t Ask for This Internet.” They ran through a familiar bill of indictment against the modern internet: surveillance, manipulation, algorithmic pricing, the squeezing of creators, spam, fraud, and the dehumanization of work. ... The Myth of the Unwanted Internet
Half a Swipe, Whole Lot of Mess: Platform Economics and the Interchange Fee Cases
Interchange-fee regulation now anchors at least three federal appellate cases. Courts will get them wrong unless they recognize a threshold fact: payment-card networks are multisided platforms. Interchange fees are the amounts card-issuing banks withhold from a transaction before paying merchant-acquiring banks. On a $100 purchase with a 2% interchange fee, the issuing bank keeps $2 ... Half a Swipe, Whole Lot of Mess: Platform Economics and the Interchange Fee Cases
The Visa Case and the Perils of Prosecuting Discounts
The U.S. Justice Department’s (DOJ) antitrust case against Visa—filed under the Biden administration—has put the debit-card market in the spotlight. Recent reporting suggests the DOJ is doubling down on a theory that Visa’s volume-based incentives and routing arrangements amount to unlawful monopolization. That claim warrants skepticism: the practices under attack are routine, efficiency-enhancing features of ... The Visa Case and the Perils of Prosecuting Discounts
When Theoretical Rigor Misses Reality: Why Interchange-Fee Caps Won’t Benefit Consumers
Interchange fees charged by payment networks have in recent years been one of the most heated and persistent battles in financial regulation. These fees—typically 1-3% of credit-card transaction value in the United States—are charges that banks impose on merchants for processing credit- and debit-card transactions. What started as an obscure technical detail has exploded into ... When Theoretical Rigor Misses Reality: Why Interchange-Fee Caps Won’t Benefit Consumers
Card-Fee Bills Would Benefit Big-Box Retailers but Harm Small Merchants
Texas’ House and Senate are considering legislation to regulate payment-card transactions, with bills that proponents claim would save millions of dollars for merchants and consumers. The evidence, however, suggests that the benefits would accrue mostly to big-box stores, while smaller merchants and consumers will both suffer. H.B. 4061 and S.B. 2056 would prohibit card-issuing banks ... Card-Fee Bills Would Benefit Big-Box Retailers but Harm Small Merchants
Capital One/Discover Deal: Rumored Concerns Lack Substance
The proposed merger of Capital One Financial Corp. and Discover Financial Services Inc. would appear to be moving toward completion, as more than 99% of the companies’ shareholders voted last month to approve the $35.3 billion deal. According to at least one report, however, anonymous sources in the U.S. Justice Department (DOJ) suggest the agency ... Capital One/Discover Deal: Rumored Concerns Lack Substance
Credit-Card Price Controls Are Counter Productive
U.S. Reps. Anna Paulina Luna (R-Fla.) and Alexandria Ocasio-Cortez (D-N.Y.) have introduced legislation that would cap credit-card interest rates at 10%, with the claim that it would help poorer Americans. Unfortunately, both economic theory and centuries of evidence demonstrate that the effect would be quite the opposite. When the government sets a ceiling on the ... Credit-Card Price Controls Are Counter Productive
The Credit Card Anti-Competition Act
In 2022, and then again in 2023, Sens. Richard Durbin (D-Ill.) and Roger Marshall (R-Kan.) introduced legislation that would have required U.S. issuers of most Visa- and Mastercard-branded credit cards to include a second network on their cards, and to allow merchants to route transactions on a network other than the primary network branded on ... The Credit Card Anti-Competition Act
