To elaborate on this further, a competitive market in payments allows for a great diversity in interchange rates for different payment types.[0] This allows competing payment networks (Visa, Mastercard, AmEx, etc.) to offer the exact most efficient rate for a transaction, based on their actual costs. Under a regulated system, less risky transactions would be subsidizing more risky transactions, because the rates are capped. Our current system allows a major grocery retailer like Costco to have flat rates at $0.30 per transaction.
I found your analysis very interesting but I think one thing is missing from it.
Once a product or service becomes ubiquitous, people will sign on partly due to the social pressure of being left out - e.g. I might get a social media account just in case my friends want to chat to me there, or a credit card because it is the primary method for online payment.
Customers like this are not necesaarily as engaged with the product/service as the initial, enthusiastic ones. The difference in engagement creates a pyramid scheme of perverse incentives, where the companies create more and more benefits for their "engaged" customers and offload the costs to everyone else. Companies get really good at evaluating just how mich cost to offload without disturbing the largely unengaged customers.
This leads to the creation of a secondary market, where you compete on extra features for the engaged part of your consumer base. Here on HN, we proudly acknowledge this fact when companies cater to geeks and techies - if i like your product, I will convince my relatives to use it.
This practice ia not neceasarily malicious, but the cost ofnpleasing your engaged consumers muat naturally come from somewhere. When a credit company adds bonuses and incentives, they are not trying to serve the interests of all their consumers.
I don't know if government intervention is appropriate in this case, especially simple and heavy-handed rules like a price ceiling. However, in this case, the incentives of the government are more closely aligned with that of all the consumers, compared to the company.
(I hope this post was coherent, I rarely write on mobile)
The EU cap is 0.2% for debit cards, so for transactions under €150, everyone gets that super Costco rate or less. Alternatively, the cap can be set to €0.05.
The card companies still appear to be making good profits.
The problem with capping the rate for all transactions is that some riskier transactions simply cost more than this to process. Without being able to charge more for them, processors will likely make the decision to just not handle these. Suddenly, entire industries and classes of customer will be shut out of the network, simply because they can't be charged fairly.
[0] https://usa.visa.com/dam/VCOM/download/merchants/Visa-USA-In...