Card Acceptance Research Articles

Cash and Card Acceptance in Retail Payments: Motivations and Factors

Cash and Card Acceptance in Retail Payments: Motivations and Factors

The Effect of Online Banking on Ethiopia's Commercial Banks' Bottom Lines

Purpose: Examining how electronic banking affects the bottom lines of Ethiopia's commercial banks was the primary motivation for this research. The study's overarching goal is to analyse the effect on commercial banking in Ethiopia of a number of variables including ATM usage, debit card acceptance at points of sale, mobile and internet banking, bank size, and management effectiveness.
 Methodology: Over the course of 2018–2022, this study focused on nine commercial banks as its primary unit of analysis. These nine commercial banks were chosen with care since they provided complete data and information during the study period. In our investigation, we used a special type of data called panel data. Separate electronic banking services such as ATMs, mobile banking, point of sale (POS), debit cards (DC), and internet banking (IB), as well as bank size and managerial efficiency, serve as supplementary controls in this investigation. Both descriptive and inferential statistics were used to help the study reach its goal. Mean, variance, and standard deviation are some of the central tendency measures that have been used in the study's descriptive analysis. Static panel data models were used for the econometric analysis in this work. These included the pooled ordinary least squares (POLS), fixed effect, and random effect models.
 Results: Commercial banks' performance, as measured by return on asset (ROA), is negatively impacted by the logarithm of mobile banking and management efficiency, according to the fixed effect model. ROA is positively and significantly impacted by bank size and the logarithmic prevalence of internet banking. For this reason, commercial banks could benefit from revaluating certain of their electronic banking offerings, especially mobile banking.

Credit card approval prediction using machine learning

This paper presents machine learning-based credit card approval prediction and gives an overview of the machine learning models and algorithms that are used to authorize credit cards for users. In order to improve credit card acceptance predictions and increase accuracy and adaptability in financial risk assessment, this study uses XGBoost in machine learning. The study emphasizes the importance of XGBoost in addressing challenges such as handling missing data, avoiding overfitting, and efficiently managing large datasets. Comparisons between the decision tree classifier and XGBoost reveal the latter's advantages, including interpretability, ability to handle complex relationships, and efficiency in processing large datasets. Results from experiments using the XGBoost algorithm demonstrate an accuracy of 90.06%, affirming its efficacy in credit card approval prediction.

Prediction of Credit Card Approval

Credit risk as the board in banks basically centers around deciding the probability of a customer's default or credit decay and how expensive it will end up being assuming it happens. It is important to consider major factors and predict beforehand the probability of consumers defaulting given their conditions. Which is where a machine learning model comes in handy and allows the banks and major financial institutions to predict whether the customer, they are giving the loan to, will default or not. This project builds a machine learning model with the best accuracy possible using python. First we load and view the dataset. The dataset has a combination of both mathematical and non-mathematical elements, that it contains values from various reaches, in addition to that it contains a few missing passages. We preprocess the dataset to guarantee the AI model we pick can make great expectations. After the information is looking great, some exploratory information examination is done to assemble our instincts. Finally, we will build a machine learning model that can predict if an individual's application for a credit card will be accepted. Using various tools and techniques we then try to improve the accuracy of the model. This project uses Jupyter notebook for python programming to build the machine learning model. Using Data Analysis and Machine Learning, we attempted to determine the most essential parameters for obtaining credit card acceptance in this project. The machine learning model we built gave an 86 % accuracy for predicting whether the credit card will be approved or not, considering the various factors mentioned in the application of the credit card holder. Even though we achieved an accuracy of 86%, we conducted a grid search to see if we could increase the performance even further. However, using both the machine learning models: random forest and logistic regression, the best we could get from this data was 86 percent.

MARKET APPROACH TO INTERCHANGE COMMISSION REGULATION: ADVANTAGES AND DISADVANTAGES

Introduction. In Ukraine the lion's share of the commission fee for the services of the acquiring institution (the cost of trade acquiring) is the interchange fee (60% – 75%) – interbank exchange fee paid by the acquirer to the issuer of electronic means of payment for each direct or indirect person) non-cash transaction, made with a payment card, and varies between 1,4 – 1,8% of the transaction amount. The average cost of trade acquiring in Ukraine is 2% of turnover and plus approximately 300 hryvnias for terminal rent per month. Interchanging payment (funds paid by the acquirer's acquirer's bank) is two-thirds of the payment charged to the merchant. Purpose. Determining the most correct market approach in the current conditions to the formation of key areas for the regulation of the interchanging commission in Ukraine and analysis of trends in the regulation of such an approach by other states. Methodology. The data on the consequences of the introduced regulation of the interchange commission in other countries of the world are analyzed, in particular: in the United States of America, China, Australia, Great Britain and others. It is considered that the marginal rate is 0. 3% below the level of exchange commissions that exists in all Member States, and therefore the impact on credit card acceptance is likely to be significant. In particular, exchange approaches in Germany, Poland, Hungary, the Netherlands, Denmark, Spain and France were analyzed. Results. In this regard, the need to maintain exclusively market-based approaches to interchange commission regulation has been proven, as this will enable the financial industry to further increase non-cash payments, reduce the share of the shadow economy and increase state budget revenues as a result of digitalization of payments.

Cash or Debit Cards? Payment Acceptance Costs for Merchants

Fumiko Hayashi examines which of two payment methods—cash or debit cards—is more costly for merchants to accept in person in six countries: the United States, Australia, Canada, the Netherlands, Norway, and Sweden. She finds that debit cards have been more costly for merchants to accept than cash in the United States in recent years, while cash has become more costly to accept than debit cards in the other five countries. Two factors explain this difference. First, although interchange fees are just one component of merchants’ debit card acceptance costs, the fees alone are higher than the total cost of accepting cash in the United States. Second, the number of cash transactions has declined at a much slower pace in the United States than in other countries, keeping the cost of accepting cash from rising.

Card Acceptance by Small Merchants: An Application of the Tourist Test to Peru

Abstract This paper presents a first estimation of the tourist test threshold for interchange fees that makes Peruvian small merchants indifferent between accepting cash and debit cards at the point of sale. We use the tourist test model (initially proposed by Rochet and Tirole), including tax evasion (Aurazo and Vasquez’s model) as an extra factor in the merchants’ decision between cash and card payments. Also, we revisit the existing empirical approaches and propose a new empirical approach, coined as the cash-flow approach, which assumes that small merchants estimate the overall cost in terms of the average ticket related to cash and card payments. Using a Survey on private costs of payment instruments conducted by the Central Reserve Bank of Peru in 2019, our estimates suggest that the tourist test threshold for debit cards is lower than the current interchange fee until 2019, even if tax evasion is not considered. Also, this study helps policymakers to better understand the factors around the merchants’ decision that may be considered to foster digital payments.

Economic and Social Factors Affecting the Purchasing Power of Customers in Fast Food Restaurants (Applied in Marsa Matrouh City)

Fast food restaurants constitute a huge percentage of restaurants sector which is considered as an important sector for each country. This sector highly depends on customer purchasing power which refers to the capacity of a customer to buy certain quantities of goods and services. Hence, the purchasing power for customers and whole country is influenced by the economic factors. The aim of this study is to understand and analyze the characteristics of customers and fast food restaurants with the different types of work in Marsa Matrouh and the impact of the economic factors on the consumers' purchasing power. The population of the study comprises all fast food restaurants in Marsa Matrouh city which contains 7 restaurants and using a simple random sampling technique. A target sample of 425 customers and 7 managers was chosen, so there are two questionnaires' forms were designed. Data were analyzed using SPSS technique and results indicated the importance of these factors and their impact on the customers' purchasing power. The results have emphasized that economic factors are the most important factors which affect the purchasing power, behavior and customers’ choices. Also, the working nature of these restaurants in that city affects their behaviors highly. The study accepts that there is a positive relationship between economic factors (consumers’ income, family income and credit card acceptance) and customer purchasing power.

Merchant Card Acceptance: An Extension of the Tourist Test for Developing Countries

Abstract The paper extends the tourist test proposed by Rochet and Tirole (2011) to the situation of emerging countries which are characterized by informality (tax evasion through cash payments). We introduce a government which faces a cost associated to cash (resources to fight against crime minus seigniorage) and tax evasion in the base model. The main idea is that merchants benefit from tax evasion since they do not provide a receipt in cash transactions and thus pocket a fraction of the VAT. In the presence of informality, the tax benefit of cash reduces the merchants’ net operating benefit of accepting card sales. The tourist test aims to determine a maximum interchange fee (the fee that the acquirer pays to the issuer whenever a card transaction is done) which makes the merchant indifferent between accepting cash or card. In this new environment, the tourist test threshold now internalizes this tax benefit of accepting cash. We assess the socially optimal interchange fees in this new model setup derived from three different social maximization functions.

CREDIT CARD ADOPTION AND USAGE IN CHINA: URBAN–RURAL COMPARISONS

This study examines the differences in credit card behaviors between rural and urban households in China. Using data from a national survey of Chinese households, results show distinct differences between rural and urban respondents in credit card adoption and usage even after controlling for relevant demographic, financial, attitude, and expectation variables. Rural households are less likely to possess a credit card, possibly due to supply side limitations such as lack of financial institutions and low rate of credit card acceptance in rural areas. No urban–rural difference is found in credit card payment behavior. Implications for policymakers and credit card issuers are discussed.

Merchant acceptance of cash and credit cards at the point of sale

Recent data show that the use of credit cards in Canada has been increasing, while the use of cash has been declining. At the same time, only two-thirds of small or medium-sized enterprises accept credit cards. To better understand the future development of this trend, it is important to study whether a change in merchant fees will increase credit card acceptance and thus further reduce cash use. To this end, this paper calculates the level of merchant fee where a merchant would be indifferent to accepting a credit card or cash payment, using the merchant indifference test. The study finds that the results are sensitive to the underlying assumptions. The paper also discusses the key issues of applying such a methodology to Canada.

THE ROLE OF CASHLESS TRANSACTIONS IN THE PROCESS OF LIMITING THE SCALE OF THE SHADOW ECONOMY

This article presents the existing state of cashless transactions in Poland, taking into consideration the network of card acceptance among enterprises. Even though in recent years cashless transactions has been dynamically developing and using bank accounts and cashless payment instruments to carry out daily transactions is becoming more popular, the distance between the level of development of cashless transactions in Poland and that in other EU countries is still significant (NBP, 2013). According to the author, the possibility of two-way operations occurring between the cashless transactions and the shadow economy is both a very important and as of yet unverified research area. The literature describes the positive influence of the cashless transactions on the reduction of the shadow economy; the author, however, has attempted to determine whether the shadow economy can also influence the development of the cashless transactions. Therefore, the purpose of this article is to prove that limiting the use of cash money in the economy can indeed contribute to the reduction of the shadow economy. Two research methods are used in this article: literature study and statistical analysis. The study of literature concerning this subject has been carried out on the basis of domestic and foreign scientific journals and the quantified description and the analysis of the shadow economy and cashless transactions have been based on extensive statistical data. According to a study, a tool that provides a possibility of the reduction of the shadow economy in the area of unregistered transactions shall be the launched Program Wsparcia Obrotu Bezgotowkowego.

Assessing the Competitive Effects of Surcharging the Use of Payment Mechanisms

The Department of Justice’s theory of liability in its case attacking the non-discrimination provisions in American Express’s merchant acceptance contends that point-of-sale competition on the price of making a purchase with a credit card is an instrument creating economic efficiency. That is, the economy would run more efficiently, and consumers would be better off, if merchants were free to charge variable prices for different types of credit cards. After all, charging different prices for using different types of payment mechanisms appears to be just another form of presumptively positive price competition. The Second Circuit rejected that conclusion, recognizing that in credit card markets competition already occurs at multiple points. American Express must compete to: • convince cardholders to apply for and use its cards; and • convince merchants to accept its cards. The question, the Second Circuit correctly recognized, is whether adding a third type of competition – for cardholders to use the card when merchants pass through their card acceptance fees – would make American Express’s card network more efficient? By prohibiting merchants who accept American Express cards from discriminating against the brand, the card company imposed a unilateral vertical restraint. Such restraints are often deemed to be reasonable under the antitrust laws because they may “stimulate inter-brand competition.” This is because an upstream provider, like American Express, has little interest in reducing its downstream sales. It would only impose a vertical restraint if that restraint efficiently helped it to sell more products. Only when an upstream or downstream provider has market power enabling it to impose restraints that harm consumers by raising price or lowering quality does a vertical restraint violate the antitrust laws. The Department of Justice’s theory postulated that the non-discrimination provisions in American Express’s merchant agreements harmed consumers by effectively requiring merchants to increase their prices to cover higher credit card fees for all customers because merchants could not pass the cost of accepting American Express directly to American Express’s own customers. The Second Circuit acknowledged the potential for consumer harm would exist if American Express charged merchants supra-competitive prices and pocketed the excess as rents. But the court held that the government failed to prove that rivalry on the price consumers pay to use a credit card at the point of sale would increase efficiency in credit card markets. As the Second Circuit explained, credit card markets are two-sided. In order to prove harm to consumer welfare in a two-sided market, an antitrust plaintiff needs to show that a restraint makes the overall system less efficient. That is, do consumers overall pay more for less because of the restraint. A card network like American Express must compete for both cardholders and merchants. One therefore cannot demonstrate that price increases on one side of the market are inefficient without examining how those prices impact competition on the other side of the market. American Express argued that it used increased revenue from the merchant side to offer a better card product to its cardholders and compete more effectively with other card networks, like Visa, for cardholder loyalty. The Second Circuit did not definitively decide whether American Express’s non-discrimination provisions were pro- or anticompetitive. It simple concluded that two-sided market economics made the question more complex than the government plaintiffs acknowledged in trying the case. And based on the record evidence, the court couldn’t tell whether the non-discrimination provisions made the market more or less efficient. Since the plaintiff bears the burden of proving harm to competition, i.e. a reduction in efficiency to the overall market, the government plaintiffs had failed to prove their case. Part I reviews the economics of two-sided markets and provides reasons to conclude that non-discrimination provisions in credit card markets are efficient. Part II explains that two-sided market economics do not guarantee against supra-competitive merchant fees that would make the market less efficient. It then contrasts Visa’s and MasterCard’s fees in the 1990s and early 2000s – which were challenged by merchants in a class action – with American Express’s current fees. It concludes that the factors giving the merchants a plausible case against Visa and MasterCard do not support the government plaintiffs in their case against American Express. Part III addresses a systemic concern expressed in a recent New York Times editorial about how a decision in American Express’s favor might impact the future enforcement of antitrust claims against dominant firms. This Part concludes that those concerns are unfounded because truly dominant firms would be subject to scrutiny under Section 2 of the Sherman Act, and Section 1 vertical restraint cases already require proof of consumer harm no different from what the Second Circuit required in its decision favoring American Express.

Cards on the Table: Efficiency and Welfare Effects of the No-Surcharge Rule

Abstract In Electronic Payment Networks (EPNs), the No-Surcharge Rule (NSR) requires that merchants charge at most the same amount for a payment card transaction as for cash. In this paper, I use a three-party model (consumers, local monopolistic merchants, and a proprietary EPN) with endogenous transaction volumes, heterogeneous card use benefits for merchants and network externalities of card-accepting merchants on cardholders to assess the efficiency and welfare effects of the NSR. I show that the NSR: (i) promotes retail price efficiency for cardholders, and (ii) inefficiently reduces card acceptance among merchants. The NSR can enhance social welfare and improve payment efficiency by shifting output from cash payers to cardholders. However, if network externalities are sufficiently strong, the reduction of card payment acceptance affects cardholders negatively and, with the exception of the EPN, all agents will be worse off under the NSR. This paper also suggests that the NSR may be an instrument to decrease cash usage, but the social optimal policy on the NSR may depend on the competitive conditions in each market.

Acceptance of Payment Cards by Retailers in Hungary Based on Data of Online Cash Registers

In our study we examined payment card acceptance in the Hungarian retail sector based on a receipt-level, detailed dataset derived from online cash registers. The main objective of our research was to identify the primary explanatory variables and to test conventional card acceptance hypotheses. For the purposes of our analysis, we relied on anonymised online cash register data provided by the National Tax and Customs Administration (NTCA) for the year 2016. Covering an extremely broad section of the Hungarian retail sector, with nearly 3.8 billion data points the database provides a basis for complex and robust analyses. We tested storelevel monthly aggregate data with county and network attributes. Based on the robust results of the research, we found that store size can be considered the most important explanatory variable behind card acceptance decisions; however, the correlation is not linear. The marginal effect of size is negligible among small and large-sized stores, but there is a strong positive correlation among mid-sized stores. We also analysed the effect of the store’s customer base and other attributes, and although numerous effects proved to be statistically significant, they wielded negligible influence in card acceptance decisions. On the other hand, being open on Sundays – a subjective variable that was used as a proxy for store ownership – had a significant negative effect on card acceptance decisions.

Did a Public Campaign Influence Debit Card Usage? Evidence from the Netherlands

Did consumers change their payment behaviour after being exposed to a public campaign that encouraged them to use their debit cards more often? We analysed the impact of such a campaign that started in 2007, using debit card transaction data between 2005 and 2013. The overall results show positive effects of the national campaign to promote debit card usage, both in the short and in the long run. The results suggest that high campaign intensity aimed at consumers had a positive impact, as did a focus on certain large retail chains. Interventions aimed at increasing debit card acceptance by retailers were effective to some extent. Providing information to retailers about the benefits of debit card acceptance led to higher card acceptance, but no proof was found for the effectiveness of financial incentives for retailers.

The Impact of Increased Credit Card Usage on Costs Incurred by Merchant Establishments in Singapore

The research aims to help merchant acquiring institutions gain a better insight on what merchant establishments in the Singapore market perceive of the costs they incur due to credit card acceptance. The research attempts to study the Singapore market and establish if increased credit card usage does increase costs for the merchant establishments that accept credit cards, this will help to acquire institutions in Singapore have a better understanding of merchant perceptions and what drives or deters credit card acceptance in the Singapore market. The survey was based on an interview of merchant establishments and the views of the merchants and was not based on their financial data. As a first step, the variables used in the survey were tested for interdependence using Chi-square tests; subsequently data reduction using factor analysis was performed and finally linear regression to establish a relation between dependent and independent variables. Merchant establishment believe accepting credit cards and increasing volume is costlier compared to another form of payment, but have mixed awareness about interchange fee. It also indicated that interchange fee and cardholder benefits are independent of the merchant establishments. The study only broadly attempts to gauge merchants view if increased credit card usage has increased costs for them.

Consumer Payment Preferences, Network Externalities, and Merchant Card Acceptance: An Empirical Investigation

The two-sided market theory holds that consumer adoption and merchant acceptance of payment cards are interdependent. However, empirical evidence on such network externalities is scarce, especially for the merchant side. This paper addresses this issue by examining merchant card acceptance in France. We exploit shopping diary data to construct a novel and fine-grained measure of French consumers’ payment preferences and match these with data from a nation-wide merchant survey. Controlling for (among other factors) cost, degree of competition, and customer characteristics, we find that the higher the probability that the average basket of a merchant is paid for by card in shops in the same sector and region, the higher the probability that the merchant will accept cards. In other words, we find that consumer preferences drive merchant card acceptance, which underpins the existence of network externalities on the merchant side of the payment card market.

Law Firm Billing Meets the Payments Revolution: The Need for a Cohesive Framework Governing Attorney Conduct

The world is in the midst of a payment system revolution. Traditional systems, such as cash and checks, are being replaced by cards and other forms of electronic payment. In fact, we are now experiencing a shift from card to non-card payment systems like PayPal and the infamous virtual currency Bitcoin. In the same way that the rise of credit cards dramatically changed how, when, and where consumers and businesses interact and gave rise to new forms of commerce, the latest phase of this revolution is causing businesses to evolve so that they can satisfy consumer preferences and capture the competitive advantages offered by new payment methods.Historically, the legal industry has been slow to embrace change, and the rapid innovation in payment systems is no exception. In fact, while more than 100 million companies now accept multiple electronic payment methods, the legal industry is still working through the ethical implications that arise when an attorney accepts credit cards. But as the payment system revolution progresses and traditional systems fade, the legal industry will have to confront growing pressure to accept new forms of payment. To that end, this Essay examines and provides solutions to the ethical challenges that new payment systems create for attorneys who want to accept them. Specifically, the Essay examines the ethical implications faced by attorneys that accept credit card, Paypal, and Bitcoin payments. In doing so, two major themes emerge. First, in light of the nearly complete absence of specific ethical guidance on emerging payment technologies like PayPal and Bitcoin, rules and opinions regarding credit card acceptance provide useful guidance for attorneys considering new ways of accepting client payments. Second, attorneys are generally free to enjoy the benefits of these new choices so long as they take time to fully understand the technologies supporting them in order to address any structural limitations that might implicate ethical rules. These themes are utilized to provide recommendations to enable the legal profession to fully embrace the electronic payment system revolution.

Chargebacks: Another Payment Card Acceptance Cost for Merchants

Although chargebacks are perceived as one of the major cost components for merchants to accept card payments, little research has been conducted on them. To fill that gap, this paper describes the current chargeback landscape by generating detailed statistics on chargebacks for signature-based transactions. Our data are from merchant processors, which, altogether, processed more than 20 percent of all signature-based transactions in the United States. For Visa and MasterCard transactions, chargebacks merchants receive are, on average, 1.6 basis points (bps) of sales number and 6.5 bps of sales value. About 70 to 80 percent of chargebacks are resolved as merchant liability. The most common chargeback reason is fraud, which accounts for about 50 percent of the total chargebacks. The merchant fraud loss rate is 0.7 bps in number and 2.6 bps in value. For American Express and Discover transactions, the total and fraud chargeback rates are somewhat lower. For all of the four networks, the total and fraud chargeback rates are significantly higher for card-not-present transactions than for card-present transactions. They also vary by merchant category. Our fraud results are generally consistent with other available fraud statistics.