Why payment card fees are biased against retailers

I formalize the popular argument that retailers pay too much and cardholders too little to make use of payment card platforms, resulting in excessive use of cards. To do this, I analyze a standard two‐sided market model of a payment card platform. With minimal additional restrictions, the model implies that the privately set fee structure is unambiguously biased against retailers in favor of cardholders, a result that continues to hold even if the platform can perfectly price discriminate on both sides. The market failure arising is primarily a regulatory problem and does not raise any competition concerns.