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An Economic Analysis of the Single Euro Payments Area (SEPA)

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  • Guido K. Schaefer
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    Abstract

    Under which conditions is it advantageous for countries to form a single payments area? This question is analyzed in a model of spatial bank competition to understand better the economic foundations of the Single Euro Payments Area (SEPA). An economic research perspective on the mostly informal policy debates about SEPA is developed. The analysis suggests that expectations about the positive effects of SEPA may be exaggerated as most channels for enhancing public welfare seem rather weak. Still the project may be worthwhile undertaking if the cost of creating SEPA-compliant systems is reduced by extending the time frame for the implementation phase and if the use of electronic payments is promoted.

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    File URL: http://www.fiw.at/fileadmin/Documents/Publikationen/Working_Paper/N_011-schaefer.pdf
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    Bibliographic Info

    Paper provided by FIW in its series FIW Working Paper series with number 011.

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    Length: 30
    Date of creation: Jan 2008
    Date of revision:
    Handle: RePEc:wsr:wpaper:y:2008:i:011

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    Postal: FIW Project Office Austrian Institute of Economic Research Arsenal Objekt 20 A-1030 Vienna
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    Related research

    Keywords: SEPA; Optimum Payments Areas; Payment System; Payment Area;

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    References

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    1. Degryse, H.A. & Ongena, S., 2003. "Distance, Lending Relationships, and Competition," Discussion Paper 2003-123, Tilburg University, Center for Economic Research.
    2. Wong, Kit Pong & Chan, Derek K., 1993. "A simple model of spatial banking competition," Economics Letters, Elsevier, vol. 42(4), pages 391-397.
    3. Adams, Robert M & Bauer, Paul W & Sickles, Robin C, 2004. "Scale Economies, Scope Economies, and Technical Change in Federal Reserve Payment Processing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(5), pages 943-58, October.
    4. Stuart E. Weiner & Julian Wright, 2005. "Interchange fees in various countries : developments and determinants," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City, issue May, pages 5-49.
    5. Bauer, Paul W & Ferrier, Gary D, 1996. "Scale Economies, Cost Efficiencies, and Technological Change in Federal Reserve Payments Processing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 1004-39, November.
    6. Hans Degryse, 2004. "The Impact of Technology and Regulation on the Geographical Scope of Banking," Oxford Review of Economic Policy, Oxford University Press, vol. 20(4), pages 571-590, Winter.
    7. Pita Barros, Pedro, 1999. "Multimarket competition in banking, with an example from the Portuguese market," International Journal of Industrial Organization, Elsevier, vol. 17(3), pages 335-352, April.
    8. Rosati, Simonetta & Secola, Stefania, 2006. "Explaining cross-border large-value payment flows: Evidence from TARGET and EURO1 data," Journal of Banking & Finance, Elsevier, vol. 30(6), pages 1753-1782, June.
    9. 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.
    10. Xavier Freixas, 2004. "The Assessment: European Financial Integration," Oxford Review of Economic Policy, Oxford University Press, vol. 20(4), pages 475-489, Winter.
    11. Manna, Michele, 2004. "Developing statistical indicators of the integration of the euro area banking system," Working Paper Series 0300, European Central Bank.
    12. Linda A. Toolsema, 2004. "Monetary Policy and Market Power in Banking," Journal of Economics, Springer, vol. 83(1), pages 71-83, 09.
    13. David Humphrey & Lawrence Pulley & Jukka Vesala, 2000. "The Check's in the Mail: Why the United States Lags in the Adoption of Cost-Saving Electronic Payments," Journal of Financial Services Research, Springer, vol. 17(1), pages 17-39, February.
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    Cited by:
    1. Bolt, Wilko & Schmiedel, Heiko, 2009. "SEPA, efficiency, and payment card competition," Working Paper Series 1140, European Central Bank.
    2. Avadanei, Anamaria & Ghiba, Nicolae, 2010. "Implication of Single Euro Payments Area for financial services market. The case of Romania," MPRA Paper 28614, University Library of Munich, Germany.
    3. Kemppainen, Kari, 2008. "Integrating European retail payment systems: some economics of SEPA," Research Discussion Papers 22/2008, Bank of Finland.

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