Who Pays for Payments?

2026

Open publication workspace · Sign in to read the full PDF.

AI-generated summary

1) This paper quantifies how interchange fees redistribute billions of dollars annually between consumers, revealing that debit and cash users effectively subsidize credit card users, with consumer sorting and merchant fee heterogeneity moderating this effect.

2) * Examines the complex flow of fees within the payment system, from merchants to acquirers, networks, and issuers, and how these fees fund consumer rewards.
* Analyzes how heterogeneity in payment methods, merchant sectors, and firm sizes leads to significant variation in interchange fees.
* Quantifies the redistributive impact of interchange fees, estimating that approximately $30 billion is transferred annually from cash and debit users to credit card users, with a regressive effect across income levels.

3) Interchange Fees, Payment Systems, Consumer Redistribution, Merchant Fees, Price Discrimination

Check the original publication for accuracy and context.