Who Pays for Payments?

2026

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AI-generated summary

1. This paper quantifies the redistribution of wealth within the payment system, revealing how interchange fees disproportionately benefit credit card users at the expense of cash and debit card users, with significant implications for consumer welfare and market competition.
2. This paper analyzes the impact of interchange fees on consumer redistribution, examining the roles of consumer sorting and merchant fee heterogeneity, and evaluates the redistributive effects of policy changes like the Durbin Amendment and the rise of premium credit cards.
3. This paper quantifies the total annual transfer of approximately $30 billion from cash and debit card users to credit card users due to interchange fees, with consumer sorting and merchant fee heterogeneity reducing this transfer by 25%.

Tags: interchange fees, payment systems, redistribution, consumer welfare, market competition

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