|The Cost and Efficiency of Credit Card Schemes – A Comparative Study on the Australian Regulatory Reform for Credit Card|
|credit card, no-surcharge rule, interchange fee, merchant service fee, cross subsidization, VISA and MasterCard|
|This paper first outlines the Australian recently adopted regulatory framework
for credit card scheme, highlighting the growing concerns over the possible
anti-competitive effects of the setting of interchange fees and the “no-surcharge
rule”.The rate of the interchange fees applied to the credit card use nowadays
raises the concerns of overcompensating the financial institution as well as the
credit card schemes and also, the “no-surcharge rule” restricted the competition
and suppressed price signals that guide the efficient allocation of resources.
In my opinion, the interchange fee should be decided at a cost-based benchmark.
The cost to be included in calculating the formula should be confined
within the related cost of processing and authorizing the transaction, of fraud and
of the interest-free period. Furthermore, the regulatory authority should review
the setting of the interchange fees regularly and related information should be
disclosed to the public in the way that consumers can easily and conveniently access.
As to the no-surcharge rule, for consumers, when they purchase with credit