Beyond interchange fee caps: rethinking merchant choice and competition in European payments
File(s)
Accepted version
Author(s)
Inderst, Roman
Valletti, Tommaso
Wentzien, Christoph
Type
Journal Article
Abstract
This article examines the persistent challenges in European payment markets a decade after the EU Interchange Fee Regulation. Despite fee caps on debit and credit card transactions, merchants continue to face limited choice and high, often opaque costs, as international card schemes raise non-regulated fees and consumer reliance on cash diminishes. We argue that regulation focused solely on price caps has proven insufficient to address structural imbalances at the point of sale and, possibly to a lesser extent, in e-commerce. While we also set out proposals for adjusting fee regulation, the core of our analysis is a shift in policy towards strengthening merchants’ effective choice of payment instruments. Two complementary approaches are developed: first, enabling merchants to initiate direct debit transactions directly from payment card data, thus creating a genuine outside option that disciplines card-based fees; second, breaking single-homing of cardholders by requiring banks to issue multiple branded debit cards or by preventing (quasi-)exclusive issuing arrangements. We also explore tentative remedies in e-commerce and mobile payments, where merchants may, on the one hand, enjoy a wider choice, but digital wallets and intermediaries may also create new “must have” bottlenecks. Overall, the paper advocates structural reforms to restore competition rather than relying exclusively on fee regulation.
Date Issued
2026-06-19
Date Acceptance
2026-05-14
Citation
Journal of Competition Law & Economics, 2026
ISSN
1744-6414
Publisher
Oxford University Press
Journal / Book Title
Journal of Competition Law & Economics
Copyright Statement
© The Author(s) 2026. Published by Oxford University Press. This is the author’s accepted manuscript made available under a CC-BY licence in accordance with Imperial’s Research Publications Open Access policy (www.imperial.ac.uk/oa-policy)
License URL
Publication Status
Published online
Date Publish Online
2026-06-19