BlueSky Thinking Summary

Lulu Wang's research investigates these complex dynamics of credit card rewards, revealing their hidden costs and systemic implications.

Beginning with the ways in which large payment networks woo consumers by touting lucrative rewards but shift expenses to merchants in the form of ever-escalating fees, Wang dives deep into possible policy interventions to right this imbalance, supported by mathematical modeling and data analysis.

Caps on merchant fees, at the expense of network profits, are promising ways of reducing credit-card use, and are efficient solutions for both consumers and merchants.

On the other side, repealing the cap of the Durbin Amendment on debit card fees could re-establish debit cards' competitiveness but gives very little relief to merchants.

Ultimately, the findings by Wang force consumers to take a second look at the ethical and cost-related implications of using rewards cards and how they perpetuate inequalities across the entire payment ecosystem.