Credit card associations, such as MasterCard, Visa andBankcard, set interchange fees for transactions between members of theassociation. These same members often compete with each other onvarious aspects of a credit card transaction. The fact that interchangefees are the outcome of cooperation among firms that otherwisecompete with each other, raises suspicion as to their efficiency andpotential anti-competitive impact.In the United States, several anti-trust actions have involvedcredit card interchange fees. For example, NaBanco, a potentialmerchant acquirer, brought an action against the Visa associationalleging that the interchange fee was set prohibitively high.
NaBancoclaimed that the fee effectively excluded entrant acquirers andfavoured incumbents who operated as both issuers and acquirers.
That suit was dismissed but controversy remains with the U.S.Department of Justice, in 2000, initiating proceedings againstMasterCard and Visa relating to dual membership by various banks inthese associations.In the United Kingdom, the Cruickshank report expressedconcern that interchange fees were set too high.
The report argued thathigh interchange fees reduce the efficiency of the payments system andthat the interchange fee and other aspects of card associations shouldbe subject to tighter regulation.Interchange arrangements in Australia are similar to elsewhere.and concerns have been raised about their efficiency and whether theyfacilitate competition or collusion. The 1998 Wallis report into the
To clarify the terminology used by credit card associations,
are members of theassociation who provide services to (retail) merchants.
provide services to customerswho hold the card. The same financial institution can operate as both an issuer and an acquirerin one association. Interchange fees are paid between separate issuers and acquirers whofacilitate a particular credit card transaction.
National Bankcard Corp (NaBanco) v Visa USA
, 779 F.2d 592 (11
D. Cruickshank, (2000),
Competition in U.K. Banking: A Report to the Chancellor of the Exchequer
,The Stationary Office: London.