Convergence in European Retail Payments

34 Pages Posted: 24 Aug 2013

See all articles by Emmi Martikainen

Emmi Martikainen

University of Turku - Department of Economics

Heiko Schmiedel

European Central Bank - Securities Settlement Systems Policy Division

Tuomas Takalo

Bank of Finland, Monetary Policy and Research Department; VATT Institute for Economic Research

Date Written: April 22, 2013

Abstract

Financial integration in some segments of the financial markets started to deteriorate during the recent period of economic turmoil in Europe. This paper examines whether this phenomenon also holds true for the European retail payments market. In comparison with other segments of the financial markets, the integration of the retail payments market has been more difficult to quantify, and the effects of recent developments – including the creation of the Single Euro Payments Area (SEPA) and the economic crisis – have been hard to evaluate using existing measures of integration. As an indicator of financial integration, convergence in the European retail payments market is measured during the period 1995-2011 for the most used retail payment instruments: cash, debit card, credit card, direct debit, credit transfer, cheque and e-money. Two methods for estimating convergence are used: sigma convergence and beta convergence. There is some evidence of convergence for all payment instruments, except for cheques and e-money. The results suggest that the cross-country dispersion of the use of payment instruments has declined over time in Europe. The pace of convergence has picked up since the introduction of the single currency. There is also some evidence of beta convergence. In contrast to some other segments of the financial markets, integration in the retail payments market has not deteriorated during the financial crisis.

Keywords: convergence, financial integration, retail payments

JEL Classification: E12, E22, E47

Suggested Citation

Martikainen, Emmi and Schmiedel, Heiko and Takalo, Tuomas, Convergence in European Retail Payments (April 22, 2013). ECB Occasional Paper No. 147. Available at SSRN: https://ssrn.com/abstract=2254817

Emmi Martikainen (Contact Author)

University of Turku - Department of Economics ( email )

20014 Turku
Finland

Heiko Schmiedel

European Central Bank - Securities Settlement Systems Policy Division ( email )

Directorate General Payment Systems
Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany
+49-69 13 44 70 59 (Phone)
+49-69 13 44 60 00 (Fax)

Tuomas Takalo

Bank of Finland, Monetary Policy and Research Department ( email )

P.O. Box 160
Helsinki, FIN-00101
Finland

HOME PAGE: http://https://sites.google.com/site/tuomastakalo/

VATT Institute for Economic Research

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