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Pricing of Payment Services: A Comparative Analysis of Paper-based Banking and Electronic Banking

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  • Göran Bergendahl
  • Ted Lindblom

Abstract

This paper aims at comparing paper-based banking and electronic banking in terms of cost-efficiency and pricing. The focus is primarily on giro payments made manually by mail and electronically via the Internet, but also by cash over the counter. The paper presents principles of efficient pricing in terms of production fees and capacity fees. It also demonstrates that the current pricing of payment services in Norway and Sweden is far away from these principles as production fees are set below marginal costs while capacity fees are in many cases above capacity costs. Such deviations may stimulate customers to an excess demand for electronic payments while paper-based payments will be depressed.

Suggested Citation

  • Göran Bergendahl & Ted Lindblom, 2007. "Pricing of Payment Services: A Comparative Analysis of Paper-based Banking and Electronic Banking," The Service Industries Journal, Taylor & Francis Journals, vol. 27(6), pages 687-707, September.
    • Handle: RePEc:taf:servic:v:27:y:2007:i:6:p:687-707
    DOI: 10.1080/02642060701453148
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    References listed on IDEAS

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    1. Mervyn K. Lewis & Kevin T. Davis, 1987. "Domestic and International Banking," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121263, December.
    2. Loretta J. Mester, 2003. "Changes in the use of electronic means of payment: 1995-2001," Business Review, Federal Reserve Bank of Philadelphia, issue Q3, pages 18-28.
    3. Guibourg, Gabriela & Segendorf, Björn, 2004. "Do Prices Reflect Costs? A study of the price- and cost structure of retail payment services in the Swedish banking sector 2002," Working Paper Series 172, Sveriges Riksbank (Central Bank of Sweden).
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    Cited by:

    1. Jakub Gorka, 2012. "Synthesis of studies on costs of cash and non-cash payment instruments (Synteza badan kosztow gotowki i bezgotowkowych instrumentow platniczych )," Problemy Zarzadzania, University of Warsaw, Faculty of Management, vol. 10(39), pages 223-241.
    2. Jakub Gorka, 2011. "Payment instruments - calculating costs and benefits (Instrumenty platnicze - wycena kosztow i korzysci)," Problemy Zarzadzania, University of Warsaw, Faculty of Management, vol. 9(34), pages 165-182.
    3. Iulia Cristina Iuga & Larisa-Loredana Dragolea, 2021. "Well-Being Impact on Banking Systems," JRFM, MDPI, vol. 14(3), pages 1-22, March.

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