No. 434 - The impact of the interchange fee regulation on merchants: evidence from Italy

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by Guerino Ardizzi and Michele Savini ZangrandiJune 2018

Interchange fees (IF) are fees that a cardholder's bank (issuer) receives from the merchant's bank (acquirer) when a card payment is executed. IF are an important part of the fees charged to merchants by acquirers (merchant fees). In 2015 the Interchange Fee Regulation (IFR) came into effect in the EU and sets maximum limits on interchange fees. This paper provides an empirical assessment of the impact of the IFR on merchants in Italy.

Using a panel of Italian banks over the period 2009-17, we find that, in line with the regulatory intent, the ceiling imposed on interchange fees has led to a sizeable drop in merchant fees and to an increase in the acceptance of card payments measured as transactions per terminal.