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Transaction Pricing and the Adoption of Electronic Payments: A Cross-Country Comparison

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Author Info
Wilko Bolt (De Nederlandsche Bank)
David Humphrey (Florida State University)
Roland Uittenbogaard (De Nederlandsche Bank)

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Abstract

After safety, the efficiency of a nation's payment system is a primary concern of central banks. Since electronic payments are typically cheaper than paper-based or cash payments, pricing these transactions should speed up the shift to electronics. But by how much? Norway explicitly priced point-of-sale and bill-payment transactions and rapidly shifted to electronic payments, while the Netherlands experienced a similar shift without pricing. Controlling for terminal availability and differences between countries, direct pricing accelerated the shift to electronics by about 20 percent. The quid pro quo was the elimination of bank-float revenues.

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Publisher Info
Article provided by International Journal of Central Banking in its journal International Journal of Central Banking.

Volume (Year): 4 (2008)
Issue (Month): 1 (March)
Pages: 89-123
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Handle: RePEc:ijc:ijcjou:y:2008:q:1:a:3

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Find related papers by JEL classification:
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Wilko Bolt & David Humphrey & Roland Uittenbogaard, 2005. "The effect of transaction pricing on the adoption of electronic payments: a cross-country comparison," Working Papers 05-28, Federal Reserve Bank of Philadelphia. [Downloadable!]
  2. Humphrey, David B & Kim, Moshe & Vale, Bent, 2001. "Realizing the Gains from Electronic Payments: Costs, Pricing, and Payment Choice," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 216-34, May.
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  3. Christopher R. Knittel & Victor Stango, 2004. "Incompatibility, Product Attributes and Consumer Welfare: Evidence from ATMs," Working Papers 04-06, NET Institute, revised Oct 2004. [Downloadable!]
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  4. Duca, John V. & VanHoose, David D., 2004. "Recent developments in understanding the demand for money," Journal of Economics and Business, Elsevier, vol. 56(4), pages 247-272. [Downloadable!] (restricted)
  5. Jonathan Zinman, 2005. "Debit or credit?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston. [Downloadable!]
  6. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-93, January. [Downloadable!] (restricted)
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  7. Ron Borzekowski & Elizabeth K. Kiser, 2006. "The choice at the checkout: quantifying demand across payment instruments," Finance and Economics Discussion Series 2006-17, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  8. Scholnick, Barry & Massoud, Nadia & Saunders, Anthony & Carbo-Valverde, Santiago & Rodríguez-Fernández, Francisco, 2008. "The economics of credit cards, debit cards and ATMs: A survey and some new evidence," Journal of Banking & Finance, Elsevier, vol. 32(8), pages 1468-1483, August. [Downloadable!] (restricted)
  9. Nicole Jonker, 2007. "Payment Instruments as Perceived by Consumers – Results from a Household Survey," De Economist, Springer, vol. 155(3), pages 271-303, September. [Downloadable!] (restricted)
  10. Jean-Charles Rochet & Jean Tirole, 2003. "Platform Competition in Two-Sided Markets," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 990-1029, 06. [Downloadable!] (restricted)
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  11. Elizabeth Klee, 2006. "Paper or plastic? the effect of time on the use of check and debit cards at grocery stores," Finance and Economics Discussion Series 2006-02, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  12. Timothy H. Hannan, 2005. "ATM surcharge bans and bank market structure: the case of Iowa and its neighbors," Finance and Economics Discussion Series 2005-46, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  13. MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec.. [Downloadable!] (restricted)
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  14. Wilko Bolt & Alexander F. Tieman, 2004. "Skewed Pricing in Two-Sided Markets: An IO approach," DNB Working Papers 013, Netherlands Central Bank, Research Department. [Downloadable!]
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  15. Humphrey, David & Kaloudis, Aris & Owre, Grete, 2004. "The future of cash: falling legal use and implications for government policy," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 14(3), pages 221-233, July. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Wilko Bolt & David Humphrey, 2007. "Payment Network Scale Economies, SEPA, and Cash Replacement," Review of Network Economics, Concept Economics, vol. 6(4), pages 453-473, December. [Downloadable!]
    Other versions:
  2. Wilko Bolt & Sujit Chakravorti, 2008. "Economics of payment cards: a status report," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 15-27. [Downloadable!]
  3. Wilko Bolt & Sujit Chakravorti, 2008. "Economics of Payment Cards: A Status Report," DNB Working Papers 193, Netherlands Central Bank, Research Department. [Downloadable!]
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