Two-Sided Market means Rochet and Tirole (2006b) define a Two-Sided Market as when the price structure, or the share that each type of end user pays the platform, affects the total volume of transactions.1

 

The key aspect of these markets is -

(i)        the presence of indirect network externalities; and

(ii)       how fee structures are able to internalize these externalities.

Often platforms subsidize the participation of one type of end user by extracting surplus from another type of end user to internalize this externality.

Payment Card Networks are composed of Purchasers (one type of end user), their financial institutions (known as Card Issuers), Merchants (the other type of end user), their financial institutions (known as Card Acquirers), and a Network Operator or platform.