What Does it Cost to Make a Payment?

We survey the limited data that exists concerning the cost of making/receiving a payment by banks, retailers, and other parties to a transaction. Since an electronic payment costs between one-third and onehalf that of a paper-based instrument, a country may save 1% of its GDP annually as it shifts from a fully paper-based to a fully electronic-based payment system. Some gains have already been realized. Additional analysis indicates that bank costs of making a payment may have fallen by 45% in Europe as the share of electronic transactions in 12 countries rose from .43 to .79 over 1987-1999.

[1]  L. Hove.  Cost-based Pricing of Payment Instruments: the State of the Debate , 2004 .

[2]  D. Humphrey.  Cost Savings from Electronic Payments and Atms in Europe , 2003 .

[3]  Tanai Khiaonarong,et al.  Bank of Finland Discussion Papers Suomen Pankin Keskustelualoitteita Finlands Banks Diskussionsunderlag Bank of Finland Discussion Papers Maksujärjestelmien Tehokkuus Ja Keskuspankin Merkitys Sen Edistämisessä Suomen Pankin Keskustelualoitteita 1/2003 , 2003 .

[4]  David B. Humphrey,et al.  EFFECTS OF ATMs AND ELECTRONIC PAYMENTS ON BANKING COSTS: THE SPANISH CASE BANKING , 2003 .

[5]  Robin C. Sickles,et al.  Scope and scale economies in Federal Reserve payment processing , 2002 .

[6]  Timothy H. Hannan.  Retail fees of depository institutions, 1997-2001 , 2002 .

[7]  Allen N. Berger,et al.  The Economic Effects of Technological Progress: Evidence from the Banking Industry , 2002 .

[8]  Geoffrey R. Gerdes,et al.  The Use of Checks and Other Noncash Payment Instruments in the United States , 2002 .

[9]  David C. Wheelock,et al.  New evidence on the Fed's productivity in providing payments services , 2002 .

[10]  Olaf Gresvik,et al.  Banks’ Costs and Income in the Payment System in 2001 , 2002 .

[11]  David B. Humphrey,et al.  Realizing the Gains from Electronic Payments: Costs, Pricing, and Payment Choice , 2001 .

[12]  T. Lindblom.  Card Payments: Pricing and Competition , 2001 .

[13]  Robert Deyoung,et al.  Comment on Scale Economies, Cost Efficiencies, and Technological Change in Federal Reserve Payments Processing , 1996 .

[14]  Kirstin E. Wells.  Are checks overused , 1996 .

[15]  Y. Braunstein,et al.  A Composite Cost Function for Multiproduct Firms with an Application to Economies of Scope in Banking , 1992 .

[16]  Allen N. Berger,et al.  Market failure and resource use: economic incentives to use different payment instruments , 1988 .