The importance of payments-driven revenues to franchise value and in estimating bank performance
This paper examines how the production of payment services impacts the franchise value of banks. It also explores whether analysis are incorrectly measuring the performance of the banking sector and failing to realize the full importance of payments-driven revenues to banks. In initial empirical analysis, we find limited evidence to suggest that higher payments-driven revenues are associated with higher franchise value. We find, also, that estimates of productive efficiency change dramatically for a small number of banks heavily involved in payments services. We find evidence to suggest that traditional efficiency estimates that exclude nontraditional bank activities inaccurately measure the relative performance of some types of BHCs. We infer from these results that estimation of efficiency must take into account the different mix of traditional and nontraditional activities in which banks engage.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): (2003)
Issue (Month): ()
|Contact details of provider:|| Postal: |
Web page: http://www.chicagofed.org/
More information through EDIRC
|Order Information:|| Web: http://www.chicagofed.org/webpages/publications/print_publication_order_form.cfm Email: |
References listed on IDEAS
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.:
- Lawrence J. Radecki, 1999. "Banks' payments-driven revenues," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 53-70.
- Sujit Chakravorti & Emery Kobor, 2003. "Why invest in payment innovations?," Emerging Issues, Federal Reserve Bank of Chicago, issue Jun.
- Loretta J. Mester, 1987. "Efficient production of financial services: scale and scope economies," Business Review, Federal Reserve Bank of Philadelphia, issue Jan, pages 15-25.
- Berger, Allen N & Hancock, Diana & Marquardt, Jeffrey C, 1996.
"A Framework for Analyzing Efficiency, Risks, Costs, and Innovations in the Payments System,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 28(4), pages 696-732, November.
- Allen Berger & Diana Hancock & Jeffrey Marquardt, 1996. "A framework for analyzing efficiency, risks, costs and innovations in the payments system," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 696-732.
- Rebecca S. Demsetz & Marc R. Saidenberg & Philip E. Strahan, 1996. "Banks with something to lose: the disciplinary role of franchise value," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 1-14.
- Allen N. Berger & Loretta J. Mester, 1997.
"Inside the Black Box: What Explains Differences in the Efficiencies of Financial Institutions?,"
Center for Financial Institutions Working Papers
97-04, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Berger, Allen N. & Mester, Loretta J., 1997. "Inside the black box: What explains differences in the efficiencies of financial institutions?," Journal of Banking & Finance, Elsevier, vol. 21(7), pages 895-947, July.
- Allen N. Berger & Loretta J. Mester, 1997. "Inside the black box: what explains differences in the efficiencies of financial institutions?," Finance and Economics Discussion Series 1997-10, Board of Governors of the Federal Reserve System (U.S.).
- Allen N. Berger & Loretta J. Mester, 1997. "Inside the black box: what explains differences in the efficiencies of financial institutions?," Working Papers 97-1, Federal Reserve Bank of Philadelphia.
- Jeffrey A. Clark, 1988. "Economies of scale and scope at depository financial institutions: a review of the literature," Economic Review, Federal Reserve Bank of Kansas City, issue Sep, pages 16-33.
- Lawrence J. Radecki, 1999. "Banks' payments-driven revenues," Staff Reports 62, Federal Reserve Bank of New York.
- Edward J. Green & Richard M. Todd, 2001.
"Thoughts on the Fed's role in the payments system,"
Federal Reserve Bank of Minneapolis, issue Apr, pages 6-27.
- Terri Bradford & Matt Davies & Stuart E. Weiner, 2002. "Nonbanks in the payments system," Payments System Research Working Paper PSR WP 02-02, Federal Reserve Bank of Kansas City.
- 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.
- Paul W. Bauer & Gary D. Ferrier, 1996. "Scale economies, cost efficiencies, and technological change in Federal Reserve payments processing," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 1004-1044.
- Sujit Chakravorti & William R. Emmons, 2001. "Who pays for credit cards?," Occasional Paper; Emerging Payments EPS-2001-1, Federal Reserve Bank of Chicago.
- Tara Rice & Kristin Stanton, 2003. "Estimating the volume of payments-driven revenues," Emerging Issues, Federal Reserve Bank of Chicago.
When requesting a correction, please mention this item's handle: RePEc:fip:fedhei:y:2003:n:eps-2003-1d. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bernie Flores)
If references are entirely missing, you can add them using this form.