China Payment Card Industry Price Formulation Mechanism And Pricing Strategy Analysis

Different from the general commodity industries, the card payment could only be used when interaction occurred between card issuing market and payment collecting market. The key features of the payment card industry are network externalities and two-sidedness. Thus its operating mechanism and price structure are special and complex. In contrast to the international advanced card industry and network scale, Chinese bank card industry is still at the initial stage and faced with huge competitive pressure given by international card organizations and banks. Therefore, finding out the key problems, designing rational pricing mechanism and strategy through analyzing industrial operation characteristics and price structure are of great importance to resolve the bottleneck of network scale and deal with the international challenges.The article used Rochet&Tirole multi-stage model to discuss payment card pricing factors, and find out that the exchange fees, as the industry key price exert great influence to the scale of the market. Many factors such as issuer charges, market competition, merchant heterogeneity, consumer information and consumption habits all can affect the industrial transaction price formation and the market scale. So the reasonable level of exchange fees and other prices are the premise of the card market development.Comparing with the intenatinoal market, the article also finded the problems of Chinese card industry and the defects of pricing mechanism, thus fingered out that the small scale is the greatest bottleneck of market development in present; the current card transaction pricing mechanism could no longer adapt to the industrial development and have many flaws, which becomes the basic factor hindering from the market further development. Finally, combining model analysis the conclusion, the article discussed the pricing improvement strategy of our country's card industry with pertinence to above problems, particularly put forward the reform proposals, which think changing the existing exchange fees simple pricing pattem and adopting margin pricing strategy is the best practice to improve Chinese payment card structure.