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CHARACTERISTICS OF A SUCCESSFUL PAYMENT METHOD: COST
2. Consumer/Bank Side of the Market Consumer cost considerations include rewards they receive, which can be offered by merchants and banks, steering mechanisms including surcharges or discounts, and consumer fraud liability. Additionally, consumers incur interest income/expenses, account creation fees, card issuance fees and potentially overdraft fees as a result of card-based transactions. Issuer cost considerations include rewards paid to consumers, card fee interchange income, interestincome/expenses, fraud prevention and liability costs, ACS costs, network fees, and issuance costs. Networks/payment methods also receive fees, but in an ideal payment system we believe these should not be sufficient to distort incentives or imbalance the interests of players in the system. As a general principle: in a mature market fees should reflect underlying costs, to ensure market efficiencies are passed on to end users and there is no rent seeking behavior. In order for this to be a reality, there has to be either sufficient competition in the system - which is challenging given natural barrier-to-entry economics prevalent in payments - or regulation/price caps.
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