Question

When consumers swipe a card, either debit or credit, to make a transaction with a merchant, the merchant pays an interchange fee to the card-issuing bank. generally, the interchange fee for a debit card is 1% of the purchase amount, while for a credit card it is 1.6% of the purchase amount. in 2009, the average interchange fee was 44 cents. in december 2010, the federal reserve proposed capping that interchange fee to 12 cents per transaction. who are the three primary stakeholders in this proposal, and what do you predict their positions will be relative to this proposal?

Answer 1

The three primary stakeholders are the banks, the merchants, and the consumers.

Banks = Against, since this would mean that they will be receiving less

Merchants = For, since they would be paying less

Consumers = Generally unaffected. But I believe they would be more against the proposal because if interchange fees are capped, then the banks will find other ways to retrieve the lost revenues by other means, such as increasing the interest or etc.