Payment Network Scale Economies, SEPA, and Cash Replacement

American Journal of Economics and Business Administration

Problem statement: The Single Euro Payments Area (SEPA) project plans to establish an integrated market for extending European integration to retail payments; it aims to provide incentives for using payment systems instead of cash for all micro payments, in order to improve both efficiency and competition in the Euro area. In this study we described the SEPA and its effects on competition and innovation in the payment systems. Moreover, we will discuss the main technological innovations (particularly mobile payments, biometrics payments and smart cards) and their impacts on retail payments. Approach: In order to analyze the impact of new technologies on cash usage we employed a mathematical model. This model is an extension of duopolistic competition to three market players; it allows analyzing market changes caused both by SEPA and technological innovations. Results: Our numerical simulations showed that new technologies cause a reduction of cash usage, such as SEPA project states. Conclusion: New payment technologies provided new benefits than the traditional payment systems. These new technologies reduced the transaction times and the logistic costs of cash management; moreover they improve the transactions safety, their easiness and convenience. Such benefits push consumers to use these new payment technologies for micro-payments (pubs and bars, nightclubs, fast food outlets, retail fuel, convenience store and vending machines), thus reducing the use of cash such as SEPA project states.

Applied Economics Letters, 2012

In this paper we present a general equilibrium model on payment choice at retail level. We analyze how the accession to an economic and monetary union, and the influence of new institutions may shape the evolution of consumers' payments in newly acceded countries. The model suggests that accessing countries approach accepting group attitudes towards payment choices as a consequence of institutional pressure and technology development. We apply the results of the model to 2004 European Union enlargement process. Results confirm the relevance of institutional environment and technology development in retail payment system decisions of newly acceded countries.

Journal of International Studies, 2018

Dynamic development of payment cards' use has been observed during the recent years in all the European Union (EU) Member States, as evidenced by the growth of issued cards, ATM, EFTPOS terminals, and the number and value of payments made through them. The aim of this paper is to assess whether the increasing number of payment cards and terminals really result in higher efficiency. In this case, the efficiency has been measured by means of Data Envelopment Analysis (DEA) using the data of the 27 EU countries, in 2005 and in 2015, namely non-radial and non-oriented Super SBM model under the assumption of a variable return to scale. The principal reasons of changes in efficiencies between 2005 and 2015 have been analyzed by means of the Malmquist index. The results of DEA analysis confirm the assumption that if an increase in a number of devices is not supported by their direct use by clients, it will only have negative impact on the banking sector in a form of efficiency lost.

National noncash retail payment markets in the euro area will gradually migrate to a single euro payments area (SEPA) from 2008 onwards. Within SEPA, citizens will be able to make and receive payments to and from other euro countries as easily and safely, and on the same conditions, as in their own country using one bank account and one set of payment instruments (debit card, credit transfer and direct debit). This study reveals that the Dutch pay differently for their cross-border purchases than for their domestic purchases and that payment behaviour differs per euro country. The limited cross-border acceptance of the debit card hampers its cross-border usage and encourages the usage of cash and credit cards. Furthermore the Dutch most often use electronic transfers, followed by the credit card, for remote cross-border payments. The speed at which the Dutch will switch over to European debit cards and credit transfers will depend heavily on acceptance levels, prices and safety. Mig...

Proceedings of the 33rd Annual Hawaii International Conference on System Sciences, 2000

Previous research indicated that the performance of interorganizational processes in electronic markets and hierarchies is influenced by eight factors: stakeholders, competition, information technology, market network (re)design, risk, process (re)design, information, and trust. This paper focuses on the inter-organizational processes related to the settlement (clearing) of cross border Euro payments. As of January 1999 the European Central Bank has intermediated the existing network of banking organizations by offering two new alternatives (TARGET and EBA). Two conclusions can be drawn from this case study. First, the process performance criteria critical mass, accurate price discovery and transparency which are important in Transaction Oriented Electronic Networks are less important in Processing Oriented Electronic Networks. Second, differences in stakeholder motives have led to problems for certain stakeholder groups, both in the development phase as well as after implementation of the two new systems.

SSRN Electronic Journal, 2000

The developed world exhibits substantial but poorly understood differences in the efficiency and quality of low-value payment services. This paper compares payments arrangements in the UK, Norway, Sweden, and Finland, and discusses the impact of network effects on incentives to adopt new payments technology. A model is presented, in which private benefits for investment in shared inter-bank payments infrastructure are weak. In contrast, due to 'account externalities', there are strong incentives for investment in intra-bank payment systems. These two features, distinguishing bank payments from other network industries, can help explain some of the observed cross country differences in payments arrangements.

Management and entrepreneurship: trends of development, 2021

The purpose of this study is to examine the current state and perspectives of noncash payments by using payment cards in Ukraine, Poland, Sweden, Romania and Hungary. The factors of transformation of the term "non-cash payments" into the term "payment system" are considered in the article. Methodology: The theoretical and practical database of the bank cards market is considered as an information base of the research. In the course of the research general, scientific, theoretical and empirical methods were used, among which are the following: analysis and generalization of literature on the research topic, methods of observation and comparison, structural methods, methods of coordination and formalization, graphical and tabular representation of data. The article presents trends in the development of new types of non-cash money, compares the development of the payment card market on a number of criteria and describes the main directions of modern use of payment cards for non-cash payments in the analyzed countries. The European Central Bank (ECB) data set, information from sites National Bank of Ukraine and Central banks of countries were collected for comparative economic research. The research findings show that changes of bank cards market greatly influence the development of non-cash payment in economy. The research findings show that changes in bank cards market greatly influence the development of non-cash payment in economy. The scientific significance of the work is that in article the issue of the factors of transformation of the non-cash settlement system into a payment system. The practical significance of the results is that in article shows in detail the ways to improve the Ukrainian market of bank cards using the experience of other EU countries. This article offers insights on the best European practice and challenges of on the bank cards market during 2015-2019 years.

SSRN Electronic Journal, 2004

Electronic payments are considerably cheaper than their paperbased alternatives. Similarly, ATMs are a more cost-efficient way to deliver certain depositor services than are branch offices. As the share of electronic payments in 12 European countries rose from 0.43 in 1987 to 0.79 in 1999 and ATMs expanded while the number of branch offices was constant, bank operating costs are estimated to be $32 billion lower than they otherwise might have been, saving 0.38% of the 12 nations' GDP. Our results are robust to the form of cost function estimated-composite, Fourier, or translog.

Journal of Banking & Finance, 2006

The developed world exhibits substantial but poorly understood differences in the efficiency and quality of low-value payment services. This paper compares payments arrangements in the UK, Norway, Sweden, and Finland, and discusses the impact of network effects on incentives to adopt new payments technology. A model is presented, in which private benefits for investment in shared inter-bank payments infrastructure are weak. In contrast, due to 'account externalities', there are strong incentives for investment in intra-bank payment systems. These two features, distinguishing bank payments from other network industries, can help explain some of the observed cross country differences in payments arrangements.

2008

Payment cards have increasingly replaced cash and checks for point-of-sale transactions in Spain and other countries. Due to how banks price card transactions-involving both the consumer and the merchant sides of the market--controversy exists over how well these prices may match the benefits as well as the underlying costs. We present information on the costs and benefits (income) of cards and other payment instruments in Spain. The detailed nature of the data makes it possible to approximate the apparent profitability of card issuers and merchant acquirers in Spain, an additional area of controversy. Finally, since payment costs can fall with increases in transaction volume, we estimate payment scale economies in Spain to illustrate how payment costs may fall in the future if processing operations were consolidated across borders in Europe, as envisioned by SEPA. (136 words)