Payment Network Scale Economies, SEPA, and Cash Replacement

29 Pages Posted: 16 Jan 2008

See all articles by Wilko Bolt

Wilko Bolt

De Nederlandsche Bank (Dutch Central Bank); VU University Amsterdam

David B. Humphrey

Florida State University - Department of Finance

Date Written: July 6, 2007

Abstract

The goal of SEPA (Single Euro Payments Area) is to facilitate the emergence of a competitive, intra-European market by making cross-border payments as easy as domestic transactions. With crossborder inter-operability for electronic payments, card transactions will increasingly replace cash and checks for all types of payments. Using different methods, the authors estimate card and other payment network scale economies for Europe. These indicate substantial cost efficiency gains if processing is consolidated across borders rather than "piggybacked" onto existing national operations. Cost reductions likely to induce greater replacement of small value cash transactions are also illustrated.

Keywords: Debit cards, scale economies, SEPA, cash replacement

JEL Classification: E41, C53

Suggested Citation

Bolt, Wilko and Humphrey, David B., Payment Network Scale Economies, SEPA, and Cash Replacement (July 6, 2007). FRB of Philadelphia Working Paper No. 07-32. Available at SSRN: https://ssrn.com/abstract=1077197 or http://dx.doi.org/10.2139/ssrn.1077197

Wilko Bolt (Contact Author)

De Nederlandsche Bank (Dutch Central Bank) ( email )

P.O. Box 98
1000 AB Amsterdam
Netherlands

VU University Amsterdam ( email )

De Boelelaan 1105
Amsterdam, ND North Holland 1081 HV
Netherlands

David B. Humphrey

Florida State University - Department of Finance ( email )

Tallahassee, FL 32306-1042
United States
850-644-7899 (Phone)
850-668-6696 (Fax)

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