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Efficiency and costs of payments: Some new evidence Takala and Viren (2007)

This paper analyzes the efficiency and costs of payment systems, focusing on the choice between cash and cards, and the social impact. Findings suggest potential efficiency gains and highlight the uneven distribution of social costs. The study challenges traditional perceptions and offers policy considerations.

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Efficiency and costs of payments: Some new evidence Takala and Viren (2007)

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  1. Efficiency and costs of payments:Some new evidenceTakala and Viren (2007) Discussant Heiko SchmiedelEuropean Central Bank Economics of Payment Systems Conference,Paris 25-26 October 2007

  2. Agenda • Scope of paper • Conceptual framework • Results and conclusions • Some remarks

  3. 1. Scope of paper • Research issues: • Costs of different payment instruments • Choice of payment instrument → Case of cash! Evidence from Finland • Place in literature: • Review of available literature: • Social cost of payment system • Cost of cash alone • Innovation: Inclusion of retail sector

  4. ??? CashCost = ∑ CB, Banks, Retail Productioncost 2. Conceptual framework • Choice between different payment instruments: • Cash ↓ , Cards ↑ , not cashless • 10 EUR Break-off point: cash vs. Cards • Calculation cost of cash: • Retail business costs: • EPC: Retail costs 1/3 of total cost of cash • Cash vs. card payment costs

  5. 3. Results and conclusion • Cost of cash: 0.12-0.18% of GDP • Cost of cash = cost of cards • Total costs of payments less than always thought! • New pricing: • First-mover disadvantage • Cooperation may not be feasible • Potential efficiency gains, e.g. economies of scale and scope • Social cost unevenly distributed

  6. 4. Some remarks • Conclusion and policy considerations • Convergence cash supply services • Cost of cash – a non-issue ! • Finland → “cash” countries ? • ECB (2007) SEPA economic impact study • Cash is the “bleeder” in all markets • Cross-subsidization • Repositioning of cash • Additional literature • Bergman/Guibourg/Segendorf (2007) • Bolt & Humphrey (2006)

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