In the case of credit cards, the fee is paid from the merchant's bank to the cardholder's bank on each transaction. These fees play an important role in determining the prices charged to both merchants and cardholders for payment services, yet they are not subject to the normal competitive forces that operate in most other markets.
To the extent that competitive forces work at all, they perversely have had two effects: •  they have encouraged the high-interchange-fee means of payment to grow at the expense of the low-interchange-fee one;  •  they have tended to push interchange fees up for the competing systems, not down. In this respect, the Australian experience is not unique.