CONCLUSIONES Y RECOMENDACIONES

the Hungarian market. The subjective opinion of merchants, in a breakdown of individuals, seems to contradict this.257 _It

is likely, however, that the costs of card payment are lower in terms of the welfare effects of the entire payments system.

Adequate research studies are necessary for comparing the different payments systems,258 _{appropriate social incentives}

can be developed on the basis of these to shift payments in the direction of the least costly payment instruments in a competitively neutral manner. It is in the fundamental interest of possible regulation that the rate of the interchange fee approximates an optimal level.

9.2 reGulaTiON relaTiNG TO SurcHarGiNG

Pursuant to the European Union directive on payment services in the internal market adopted in 2007, in the course of implementation of the directive, Member States are obliged to regulate the possibility for merchants to apply different prices in relation to different payment instruments. This enables merchants to favour payment instruments that are more advantageous (typically cheaper) for them. The directive allows Member States to deviate from this provision.

In the process of adopting the Payment Services Act in Hungary, legislation set out that ‘the beneficiary may charge fees,

costs or other payment obligations, or provide discounts for the use of cash substitutive payment instruments.’259 _Section

165 of Act ClIX of 2010, however, amended the earlier provision. Thus, as of 1 January 2011, ‘the beneficiary may not

charge fees, costs or other payment obligations for the use of cash substitutive payment instruments’ (i.e.surcharging is currently not possible).

257 _{Because the costs of card payment are much more obvious for merchants, therefore these presumably play a larger role.}

258 _{Such research is in progress on a European level on behalf of the Directorate General for Competition of the European Commission. See Allix (2009)} presentation for the Payment Systems Market Expert Group. Similar research is conducted by the European Central Bank and the Magyar Nemzeti Bank.

10.1 POSSiBiliTy Of iNTercHaNGe fee reGulaTiON

Necessity of the interchange fee. On the basis of theory and practice relating to the interchange fee, we can conclude that the handling of externalities underlying the system may be necessary for the optimal operation of the system, therefore the application of a certain type of equilibrium mechanism may be justified. We should note, however, that the economic literature on the topic does not provide a clear answer as to whether the interchange fee is essential, although most models suggest that it offers a possible means of optimising the system.

competition concerns.Interchange fees applied within four-party card systems raise serious competition concerns and these have been the subject of numerous competition proceedings. The fact that market participants deciding on the interchange fee do not represent all parties of the system leads to a conflict of interest and raises the possibility that the parties setting the fee do not necessarily aim at optimising the operation of the system, but rather at optimising their own profits. The interchange fee may be used to prevent entry into the acquirer market, and at profit-maximising levels, it may increase and distort consumer prices.

is regulation justified? Since income distribution, represented by the equilibrium mechanism, may be necessary for the optimal operation of the system, but because system participants are not necessarily able to agree on this, it is possible that regulatory instruments may be required for the optimisation of the system.

10.2 few PracTical exaMPleS fOr THe TiMe BeiNG, eu reGulaTiON iS NOT

exPecTeD iN THe Near fuTure

regulation in australia, competition proceedings in europe.At this point, a comprehensive example of regulation can only be found in Australia. To the knowledge of the authors, there are no regulatory proposals, even in a drafting phase, before bodies of the European Union with regulatory competencies. At the same time, the proceedings launched by the Directorate General for Competition of the European Commission have a substantial effect on interchange fee rates, particularly in light of the fact that after the MasterCard proceedings and in the course of the Visa debit card proceedings, the card companies radically reduced fees applied to cross-border transactions. These developments are often regarded as a form of regulation particularly, but not exclusively by representatives of the card companies.

Accordingly, comprehensive European level regulation of this issue is not expected in the near future. It is possible, however, that fees related to Visa payment cards will further decline as a result of a settlement reached with the European Commission.

10.3 iMPOrTaNT aSPecTS Of THe HuNGariaN carD MarKeT

less developed market. The Hungarian card market is less developed than the European average, and the number of transactions is significantly lower than the European Union average. The lag is relatively larger in relation to card acceptance than in the case of card issuance.

On-us transactions. The Hungarian card market shows an extremely high number of on-us transactions, where the card issuer and card acquirer are the same. No interchange fee is paid in this case, but this may pose a major obstacle to market entry on the acquirer side and provide a significant competitive advantage for the major acquirer(s) already present on the market.