The Drama of Interchange Fees

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Vitor Bento, Mar 31, 2008

The main problem with the economics of card payments is that cash is used as its yardstick and cash payments, being the most socially inefficient means of payment, are made available at a price significantly below cost (often free of charge). To supply cash payments at a loss and in order to remain a profitable business, banks have to overcharge other services (cross-subsidization). This practice is a leg