Payments are no free lunch
AbstractTotal costs of the payments system to society are considerable. These costs can be higher or lower depending on the use of payment instruments that are less or more cost efficient. Empirical evidence is provided by a survey on the costs of POS payment instruments in the Netherlands. The overall costs involved in POS payments amount to 0.65% of gdp or, equivalently EUR 0.35 per transaction. The e-purse is most cost-efficient, irrespective of the size of a transaction, while if the choice is between cash and the debit card, the former is most economical for purchases below EUR 11.63 and the debit card is to be preferred for larges purchases. From a cost perspective, credit cards should not be used at all. The distorting effects caused by the use of public resources to finance the expenses made by central bank to maintain the cash circulation is found to be limited. It is argued that a less-cash society has better chances of success than a cashless one, at least in the medium term.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Occasional Studies with number 302.
Date of creation: Oct 2005
Date of revision:
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.:
- ten Raa, Thijs & Shestalova, Victoria, 2004. "Empirical evidence on payment media costs and switch points," Journal of Banking & Finance, Elsevier, vol. 28(1), pages 203-213, January.
- Alexander F. Tieman & Wilko Bolt, 2003.
"Pricing Debit Card Payment Services: An IO Approach,"
IMF Working Papers
03/202, International Monetary Fund.
- W. Bolt & A.F. Tieman, 2003. "Pricing Debit Card Payments Services: An IO approach," WO Research Memoranda (discontinued) 735, Netherlands Central Bank, Research Department.
- repec:ner:toulou:http://neeo.univ-tlse1.fr/25/ is not listed on IDEAS
- Leo Van Hove, 2004. "Cost-based Pricing of Payment Instruments: the State of the Debate," De Economist, Springer, vol. 152(1), pages 79-100, 03.
- Raa, T. ten & Shestalova, V., 2004. "Empirical evidence on payment media costs and switch points," Open Access publications from Tilburg University urn:nbn:nl:ui:12-140874, Tilburg University.
- Rochet, Jean-Charles & Tirole, Jean, 2003.
"Platform Competition in Two-Sided Markets,"
IDEI Working Papers
152, Institut d'Économie Industrielle (IDEI), Toulouse.
- Humphrey David & Willesson Magnus & Lindblom Ted & Bergendahl Göran, 2003. "What Does it Cost to Make a Payment?," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-16, June.
- 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.
- Adriaan R. Soetevent, 2009. "Payment Choice, Image Motivation and Contributions to Charity," Tinbergen Institute Discussion Papers 09-015/1, Tinbergen Institute, revised 04 Aug 2010.
- Krueger, Malte, 2009. "The Pricing of Payments," MPRA Paper 24759, University Library of Munich, Germany.
- Wilko Bolt & Sujit Chakravorti, 2008.
"Economics of Payment Cards: A Status Report,"
DNB Working Papers
193, Netherlands Central Bank, Research Department.
- Wilko Bolt & Sujit Chakravorti, 2010. "Digitization of Retail Payment," DNB Working Papers 270, Netherlands Central Bank, Research Department.
- Nicole Jonker, 2013. "Social costs of POS payments in the Netherlands 2002-2012: Efficiency gains from increased debit card usage," DNB Occasional Studies 1102, Netherlands Central Bank, Research Department.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rob Vet).
If references are entirely missing, you can add them using this form.