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Abstract

Payment Network Scale Economies, SEPA, and Cash Replacement

The Review of Network Economics

Vol. 6, Issue 4 - December 2007, pp 453 - 473


Authors
  Wilko Bolt
Research Department, De Nederlandsche Bank, The Netherlands

David Humphrey
Department of Finance, Florida State University, Tallahassee, FL, U.S.A. E-mail: [email protected]

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 cross-border inter-operability for electronic payments, card transactions will increasingly replace cash and checks for all types of payments. Using different methods, we estimate card and other payment network scale economies for Europe. These indicate substantial cost efficiency gains if processing is consolidated across borders rather than "piggy-backed" onto existing national operations. Cost reductions likely to induce greater replacement of small value cash transactions are also illustrated.

Keywords: Keywords: Keywords: payments, European, cross-border

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