Zywicki Research Cited in The Economist
An article in The Economist about debit card interchange fees under the Durbin Amendment to the Dodd-Frank financial reform legislation cites a paper by Professor Todd Zywicki. Zywicki co-authored the paper, entitled “Price Controls on Payment Card Interchange Fees: The U.S. Experience", with Geoffrey A. Manne of the International Center for Law and Economics, and Julian Morris of the Reason Foundation.
“Mr Durbin’s amendment has cost the banks $6.6 billion-8 billion annually, according to a paper by the International Centre for Law and Economics (ICLE), a think-tank. But retailers, whose profits have been sapped by the weak recovery from the financial crisis, seem to have pocketed most of the windfall, just as they did when interchange fees were cut in Australia. (Their shares jumped when the new rules were announced.) Meanwhile the banks, which are in even worse shape, have tried to make up for the lost revenue with higher charges for other things, including monthly fees for having a debit card, or even a current account. In 2009 banks provided 76% of America’s current accounts free of charge; last year the figure was only 38%. The higher charges in turn, have pushed 1m Americans out of the formal financial system—not the result Mr Durbin was aiming for.”
Plastic stochastic, The Economist, October 4, 2014.