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Payment network scale economies, SEPA, and cash replacement

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  • Wilko Bolt
  • David B. Humphrey

Abstract

The goal of SEPA (Single Euro Payments Area) is to facilitate the emergence of a competitive, intra-European market by making cross-border payments as easy as domestic transactions. With crossborder inter-operability for electronic payments, card transactions will increasingly replace cash and checks for all types of payments. Using different methods, the authors estimate card and other payment network scale economies for Europe. These indicate substantial cost efficiency gains if processing is consolidated across borders rather than \"piggybacked\" onto existing national operations. Cost reductions likely to induce greater replacement of small value cash transactions are also illustrated.

Suggested Citation

  • Wilko Bolt & David B. Humphrey, 2007. "Payment network scale economies, SEPA, and cash replacement," Working Papers 07-32, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:07-32
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    References listed on IDEAS

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    2. Garcia-Swartz Daniel D. & Hahn Robert W. & Layne-Farrar Anne, 2006. "The Move Toward a Cashless Society: A Closer Look at Payment Instrument Economics," Review of Network Economics, De Gruyter, vol. 5(2), pages 1-24, June.
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