Interchange fees with cashless stores, cashless consumers, and cash-only consumers

Shy, Oz

doi:10.1016/j.econlet.2022.110284

Cited by 3 publications

(2 citation statements)

References 10 publications

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“…Despite the limited sample size of the IV analysis, it is nonetheless reassuring that e-money and cash have effects that go in the opposite direction, as expected. Second, we do not consider changes in interchange fees in the presence of cashless stores that may also influence cashless payment adoption rates during the PHE (Shy, 2022). Third, trends in VAT compliance gaps may be influenced by underlying social capital that has impacted the incidence of the PHE and resulting mobility restrictions in Austria, Germany, Italy, the Netherlands and Sweden (Bartscher et al, 2021).…”

Section: Discussionmentioning

confidence: 99%

Cashless Payments and Tax Evasion: Evidence From VAT Gaps in the EU

Bohne,

Koumpias,

Tassi

2023

SSRN Journal

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Section: Discussionmentioning

confidence: 99%

Cashless Payments and Tax Evasion: Evidence From VAT Gaps in the EU

Bohne,

Koumpias,

Tassi

2023

SSRN Journal

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“…In the absence of taxes, the literature which finds that card companies may set higher-than-optimal interchange fees includes Carlton and Frankel (1995), Cabral (2006), Wang (2010) (if consumer demand is sufficiently elastic), Rochet and Tirole (2011), Wright (2012), Bedre-Defolie andCalvano (2013), andShy (2022).…”

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confidence: 99%

Should credit card rewards be taxed?

Shy

2023

J Public Economic Theory

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Rewards that consumers receive on credit card payments influence their payment choice. They are not taxed but merchants deduct card fees from their taxes. This article analyzes the tax effects in a model where card companies set interchange fees, merchants decide whether to accept card payments, and consumers choose their preferred payment method. I find that card companies raise interchange fees when merchants are allowed to deduct these fees from their taxes. Taxing consumers' card rewards reduces interchange fees. The optimal distribution of cash and card payments cannot be supported without a policy combination of taxes and regulated interchange fees.

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Card Acceptance by Small Merchants: An Application of the Tourist Test to Peru

Aurazo¹,

Vega²

2021

Review of Network Economics

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This paper presents a first estimation of the tourist test threshold for interchange fees that makes Peruvian small merchants indifferent between accepting cash and debit cards at the point of sale. We use the tourist test model (initially proposed by Rochet and Tirole), including tax evasion (Aurazo and Vasquez’s model) as an extra factor in the merchants’ decision between cash and card payments. Also, we revisit the existing empirical approaches and propose a new empirical approach, coined as the cash-flow approach, which assumes that small merchants estimate the overall cost in terms of the average ticket related to cash and card payments. Using a Survey on private costs of payment instruments conducted by the Central Reserve Bank of Peru in 2019, our estimates suggest that the tourist test threshold for debit cards is lower than the current interchange fee until 2019, even if tax evasion is not considered. Also, this study helps policymakers to better understand the factors around the merchants’ decision that may be considered to foster digital payments.

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Interchange fees with cashless stores, cashless consumers, and cash-only consumers

Cited by 3 publications

References 10 publications

Cashless Payments and Tax Evasion: Evidence From VAT Gaps in the EU

Cashless Payments and Tax Evasion: Evidence From VAT Gaps in the EU

Should credit card rewards be taxed?

Card Acceptance by Small Merchants: An Application of the Tourist Test to Peru

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