Saturday, January 27, 2007

Interchange Fees

Interchange fee is an interesting animal. This is the fee that flows from the payer's bank to the payee's bank (or in the opposite direction). This is supposedly to cater for the "imbalances" of capital required to build the payment infrastructure. This is a remnant of the past where the cost of a POS and an ATM (and the maintenance of this equipment) was expensive. Nowadays, with everything turning more and more into electronic on-line transactions and where transactions are running off personal devices (like mobile phones), the capital cost for the banks have just about disappeared.

It is therefor interesting that a number of regulators are considering the impact of interchange fees. See for instance (, and

The question is: When will the cost of leveraging the interchange fee be bigger than the actual fee? This would be the time to totally abolish interchange fees, and maybe the time is near?


Hannes@Home said...

The European Commision is about to annouce that they will not make any recommendations on changes to Interchange Fees in Europe. While this may be a big win for retail banks and CCA, this is a major step back in the overhaul of payment systems worldwide. One would have liked to see more bold and decisive action from governing bodies... but then "bold and decisive" should probably not be used in the same sentence with "governing".

Hannes@Home said...

The last have not yet been said about Interchange fees. Read: