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Single euro payment area (SEPA) and banking industry: discriminatory pricing vs. non-discriminatory pricing

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  • Bita Shabgard

    (Universitat Autonoma de Barcelona (UAB))

Abstract

The single euro payments area (SEPA) project eliminates the incompatibility between domestic payment systems across European countries. It also enforces uniform pricing between national and international transactions. How does this policy affect competition among European banks in the retail payment market? To address this question, we explore and solve a model of non-linear price competition between two asymmetric banks in terms of transactional capital by considering price discrimination in pre-SEPA and uniform pricing in post-SEPA, under presence of economies of scale. Our results show that the transaction pattern plays an important role in the effect of SEPA on competition between banks; Competition is less intense in post-SEPA when the transaction pattern is domestically oriented. Moreover, comparison of pre-SEPA with post-SEPA phases suggests that SEPA intensifies competition when economies of scale are large enough. We further show that consumer surplus improves in post-SEPA but the effect of SEPA on welfare depends on fixed adjustment cost.

Suggested Citation

  • Bita Shabgard, 2021. "Single euro payment area (SEPA) and banking industry: discriminatory pricing vs. non-discriminatory pricing," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 48(3), pages 355-383, September.
    • Handle: RePEc:spr:epolin:v:48:y:2021:i:3:d:10.1007_s40812-021-00183-0
    DOI: 10.1007/s40812-021-00183-0
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    References listed on IDEAS

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    Cited by:

    1. Ali Salmasnia & Ali Talesh-Kazemi & Mohammad Reza Maleki, 2022. "Joint optimization of inventory planning, maintenance policy and pricing for perishable complementary products by considering the product freshness and technology level," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(4), pages 713-746, December.

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    More about this item

    Keywords

    SEPA project; Banking industry; Non-linear pricing;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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