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Cost-based Pricing of Payment Instruments: the State of the Debate

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  • Leo Van Hove

Abstract

Earlier I have argued in favour of explicit cost-based pricing of payment instruments. This article analyses new cost estimates for the Netherlands, and provides an overview of positions recently taken by important actors such as central banks and the European Commission. The new cost estimates strengthen the case for e-money. The central bank reports indicate that many are now convinced that a transparent pricing structure can increase efficiency. The Commission, on the other hand, seems unlikely to allow commercial banks to make a coordinated move towards cost-based pricing in order to break the deadlock in which they find themselves today.

Suggested Citation

  • Leo Van Hove, 2004. "Cost-based Pricing of Payment Instruments: the State of the Debate," De Economist, Springer, vol. 152(1), pages 79-100, March.
    • Handle: RePEc:kap:decono:v:152:y:2004:i:1:p:79-100
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    Cited by:

    1. Hans Brits & Carlo Winder, 2005. "Payments are no free lunch," DNB Occasional Studies 302, Netherlands Central Bank, Research Department.
    2. Giovanni Immordino & Francesco Flaviano Russo, 2014. "Taxing Cash to Fight Collaborative Tax Evasion?," CSEF Working Papers 351, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    3. David, Bounie & Abel, François & Patrick, Waelbroeck, 2016. "Debit card and demand for cash," Journal of Banking & Finance, Elsevier, vol. 73(C), pages 55-66.
    4. Humphrey, David & Willesson, Magnus & Bergendahl, Goran & Lindblom, Ted, 2006. "Benefits from a changing payment technology in European banking," Journal of Banking & Finance, Elsevier, vol. 30(6), pages 1631-1652, June.
    5. Sujit Chakravorti & Victor Lubasi, 2006. "Payment instrument choice: the case of prepaid cards," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 30(Q II), pages 29-43.
    6. Marianne VERDIER, 2008. "Payment Card Systems in Europe: Convergence or Disappearance?," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(69), pages 127-150, 1st quart.
    7. Gene Amromin & Sujit Chakravorti, 2007. "Debit card and cash usage: a cross-country analysis," Working Paper Series WP-07-04, Federal Reserve Bank of Chicago.
    8. Bouhdaoui, Y. & Bounie, D. & Van Hove, L., 2013. "When do plastic bills lower the bill for the central bank? A model and estimates for the U.S," Journal of Policy Modeling, Elsevier, vol. 35(1), pages 45-60.
    9. Verdier, Marianne, 2012. "Interchange fees and inefficiencies in the substitution between debit cards and cash," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 682-696.

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