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And lower CC merchant fees respond to the merchants' losses to fraud.

• jessriedel 10y ago
  Could you explain what you mean?
  • colechristensen 10y ago
    In the US there is a ~1.5-5% fee for each credit card transaction. In the EU it's capped at 0.3% Losses due to fraud are much easier to eat in the US because of the 10x larger fee.
  • superuser2 10y ago
    Interchange fees are set based (in large part) on how much fraud the processor expects to deal with. This is why interchange fees are lower for card-present than card-not-present transactions, and higher in business categories that tend to have more fraud. A processor does not charge lower fees for chip cards in a vacuum, they do it because they expect to eat less fraud from chip cards.
    • jessriedel 10y ago
      Oh, I understand what you're claiming now. But I don't think the effect your describing is very important. As colechristensen points out, the fees in the US are 5-20 times larger while their fraud rate is only about twice. So it looks like other factors (e.g. degree of regulation, monopsony effects, etc.) have a much larger influence on interchange fees than fraud rates. Indeed, the amount lost from fraud is only about 0.1% of transactions in the US, and 0.05% in the EU. http://www.paymentscardsandmobile.com/wp-content/uploads/2015/03/PCM_Alaric_Fraud-Report_2015.pdf http://www.paymentscardsandmobile.com/wp-content/uploads/201...