I. INTRODUCTION Since May 2004, merchants in different industries across China have had disputes with UnionPay and banks due to POS card swiping fees. They even removed pos machines and refused to use card cards for consumer payments. After more than 20 years of development, China's bank card industry, whether it is the change of cardholders' concept or the support of government policies, is promoting the rapid and healthy development of the bank card industry. Behind the storm is the silver merchant dispute. If merchants accept consumer card payment, they need to pay a certain fee to the bank card organization. In China, the POS machine fee accounts for about 1-2% of the transaction amount. Different, POS machine fees will be different, but consumers do not need to pay extra for the UnionPay card machine, and sometimes get extra rewards for card swiping. These rewards are ultimately from merchants, merchants are unbearable The high rate and the resentment have caused the protests. In fact, the dispute of silver merchants is not a product of China's immature bank card market. In the mature bank card market in the West, the merchant's POS machine fee is 2-3%, and the silver merchants' dispute is equally fierce. Since the problem of card processing fee rate is essentially the pricing mechanism of bank card service, the pricing mechanism of bank card service is to explain the root cause of bank disputes and is also an important issue for solving disputes. Based on the theory of bilateral market, this paper analyzes the rationality of exchange fees and the determination of optimal exchange fees, and proposes reasonable suggestions for credit card disputes between bankers.
Second, a theoretical overview of the operating mechanism and pricing mechanism of bank cards
(1) Bank card operation mechanism
The bank card industry is a typical bilateral market. First of all, the study of bilateral markets is carried out. It is considered that the bilateral market refers to the operators of one or several network platforms in the market. They also provide products or services to end users with completely different demands, and try to make reasonable market to each side. Charges are used to encourage disparate end users to trade on their platforms, thereby gaining profits or at least maintaining a break-even market.
The core product of the bank card industry is the service provided by the bank card to consumers and merchants. This service is provided by the issuing bank and the acquiring bank to the consumers and merchants on the platform provided by the bank card organization. Therefore, the market participants involved in the bank card industry market include consumers, card-issuing banks that provide services to consumers, merchants, acquiring banks that provide services to merchants, and bank card organizations, which together constitute a complex network of the bank card industry market.
It can be seen that the card issuer participates in the competition in the issuance market by providing diversified services, determines the number of bank card issuance and the object of issuance on the basis of cost-benefit, and encourages the cardholder to use the bank card service. When a transaction occurs on the platform, the cardholder pays the commodity price and card fee p+f to the card issuer after purchasing the goods from the merchant. The card issuer and the cardholder jointly form the card issuance market for bank card services. After the card-issuing bank receives the funds, it will pay the money after the exchange fee is paid to the acquiring institution. The acquiring institution and the merchant form a strategic relationship through the POS electronic collection agreement. The acquiring institution provides terminal equipment to the special merchants, and carries out fund clearing and bears certain fund clearing risks; the merchant selects the bank card service based on the convenience and accuracy of the payment method, and pays a certain bank card service fee to the acquiring institution. m. After the acquirer will deduct the merchant deduction rate from the funds received, the remaining funds will be paid to the merchant. The acquirer and the special merchants together constitute the acquiring market for bank card services. In the above process, the card fee f is determined by the market competition between the issuing banks in the card issuance market, and the merchant deduction rate m is determined by the market competition between the acquiring banks in the acquiring market, and they are not fixed. (For example, since China implemented the No. 126 document of the People’s Bank of China in March 2004, the “China Banking Union’s Banking Card Interbank Transaction Income Distribution Method†has been used to issue the inter-bank transaction fee income between banks. The transfer center and the acquiring line are changed to 7:1:X according to the 8:1:1 allocation mode, so that the receipt income is completed by the market price). The merchant deduction rate consists of three parts: “exchange fee + bank card organization network service fee + billing service feeâ€.
The simultaneous presence of the card-issuing market and the acquiring market indicates that the bank card industry has significant bilateral market characteristics. Only when the demand for bank cards by consumers and merchants is balanced, the bank card organization network platform can operate normally, and the value of bank cards can be reflected. The common goal of bank card organizations is to maximize the total profit of member banks. Therefore, it must take certain balancing measures to balance the interests of both parties and the network operation costs of bank card organizations. In order to obtain an optimal price structure to balance the demand behavior of consumers and merchants, bank card organizations generally use exchange fees to indirectly achieve the purpose of influencing consumer prices and merchant prices.
(II) Theoretical study of exchange fees Exchange fees refer to a fee paid by the acquiring bank to the issuing bank to compensate for the cost incurred by the issuing bank in attracting and maintaining the cardholder. Changes in exchange fees can affect changes in card fees and merchant deduction rates, which indirectly affect the price structure of consumers and merchants. The exchange fee is the only means by which the bank card organization can balance the needs of both parties and achieve the optimal price structure.
The pricing level of bank card consumption is also a problem that is often controversial and needs to be continuously explored in the mature international market. At present, there are mainly two types of views: First, the exchange fee is the key to balancing the bilateral interests of the bank card market, and plays an important role in the development of the bank card market, represented by Baxter, and the optimal development based on this. The theory and model of exchange rate, including Schmalensee, Rochet & Tirole, Wright and other models for determining the optimal exchange fee for merchants' strategic behavior; secondly, the exchange rate does not have much impact on the final transaction price of the bank card, so there is no existence. The necessity is that Carlton & Frankel is the most representative, and Katz et al. based on the research of Australian credit card system reform, tends to cost-based pricing model, and basically negates the existence of market-optimized exchange fee mechanism.
It can be seen from foreign studies that based on the above two types of views, the theoretical community has three representative opinions on the determination of exchange fees: zero exchange fee; exchange fee based on cost; exchange fee is determined by the market or determined by the bank card organization. Zero exchange fees mean government subsidies, which are less feasible in reality. With the intervention of anti-monopoly agencies, some countries or regions tend to prefer pricing methods based on cost pricing or government pricing. But so far, in most cases, the exchange fee is still subject to market pricing, which is determined by the bank card organization, and the pricing method has changed from unified pricing to differential pricing.
In 2003, Rochet and Tirole put forward the theory of bilateral market, and people's understanding of the market characteristics of the bank card industry went a step further. Economists began to analyze the monopoly platform from the analysis of bank card pricing under the competition of multiple platforms, and made some progress and reached some consensus. The theoretical research of the bank card industry has entered a new stage.
Third, the model analysis of pricing mechanism
According to the development of the card issuance market in most countries in China and the world, the theoretical model of this paper will study the influencing factors of exchange fees and the deviation from the optimal exchange fee on the premise of incomplete competition in the card issuance market.
Hypothesis 1: The revenue generated by POS card consumption for cardholders and special merchants reflects the preference of cardholders and special merchants for bank card payment methods for bB, bS, bB, bS, respectively, relative to other payment methods such as cash. . All merchants have the same preference for bank card payment methods and do not impose additional fees on cardholders. Cardholders have different preferences, and bB obeys h(bB) and distribution function H(bB) in interval [bB, bB].
Assumption 2: The unit transaction costs of the card issuer and the acquirer are c1 and cA, respectively, which mainly include the technical cost, capital cost and risk loss incurred by the card issuer and the acquirer. The card issuing institution collects the card fee f from the cardholder, and the merchant's deduction rate charged by the acquiring institution to the special merchant according to the transaction amount is m.
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