Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/336359 
Year of Publication: 
2022
Citation: 
[Journal:] Latin American Journal of Central Banking (LAJCB) [ISSN:] 2666-1438 [Volume:] 3 [Issue:] 4 [Article No.:] 100076 [Year:] 2022 [Pages:] 1-13
Publisher: 
Elsevier, Amsterdam
Abstract: 
As in many developing economies, cash is still widely used in Colombia, even among merchants who accept payment cards. Indeed, 60% of these merchants use dissuasive strategies to make their clients pay with cash. This paper presents estimates of merchant card fees that are optimal according to the Tourist Test, so that merchants are indifferent between being paid with cash or cards. We find the estimates are far below the rates that the industry charges because of the low marginal costs of cash and the incentives that sales-tax evasion-a common practice in many developing economies-adds to its promotion. Moreover, we find that reductions in cash usage may lead to an increase in optimal merchant card fees due to scale effects. The results show that the Tourist Test should be used as a guideline for regulators but ought to be complemented with a broader analysis of the industry.
Subjects: 
Cash
Debit and credit cards
Merchant card fees
Merchant interchange fees
Tourist test
JEL: 
D23
D40
G20
G21
G28
E41
E58
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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