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Transaction Pricing and the Adoption of Electronic Payments: A Cross-Country Comparison

Author

Listed:
  • Wilko Bolt

    (De Nederlandsche Bank)

  • David Humphrey

    (Florida State University)

  • Roland Uittenbogaard

    (De Nederlandsche Bank)

Abstract

After safety, the efficiency of a nation's payment system is a primary concern of central banks. Since electronic payments are typically cheaper than paper-based or cash payments, pricing these transactions should speed up the shift to electronics. But by how much? Norway explicitly priced point-of-sale and bill-payment transactions and rapidly shifted to electronic payments, while the Netherlands experienced a similar shift without pricing. Controlling for terminal availability and differences between countries, direct pricing accelerated the shift to electronics by about 20 percent. The quid pro quo was the elimination of bank-float revenues.

Suggested Citation

  • Wilko Bolt & David Humphrey & Roland Uittenbogaard, 2008. "Transaction Pricing and the Adoption of Electronic Payments: A Cross-Country Comparison," International Journal of Central Banking, International Journal of Central Banking, vol. 4(1), pages 89-123, March.
  • Handle: RePEc:ijc:ijcjou:y:2008:q:1:a:3
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Hromcová, Jana & Callado-Muñoz, Francisco J. & Utrero-González, Natalia, 2014. "Effects of direct pricing of retail payment methods in Norway," Economic Modelling, Elsevier, vol. 37(C), pages 428-438.
    2. John Bagnall & David Bounie & Kim P. Huynh & Anneke Kosse & Tobias Schmidt & Scott Schuh, 2016. "Consumer Cash Usage: A Cross-Country Comparison with Payment Diary Survey Data," International Journal of Central Banking, International Journal of Central Banking, vol. 12(4), pages 1-61, December.
    3. Silva, Vânia G. & Ramalho, Esmeralda A. & Vieira, Carlos R., 2016. "The impact of SEPA in credit transfer payments: Evidence from the euro area," Research in International Business and Finance, Elsevier, vol. 38(C), pages 404-416.
    4. Wilko Bolt & Sujit Chakravorti, 2008. "Economics of payment cards: a status report," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 15-27.
    5. Bolt, Wilko & Humphrey, David, 2010. "Bank competition efficiency in Europe: A frontier approach," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1808-1817, August.
    6. Scott Schuh & Joanna Stavins, 2012. "How consumers pay: adoption and use of payments," Working Papers 12-2, Federal Reserve Bank of Boston.
    7. Ardizzi, Guerino, 2013. "Card versus cash: empirical evidence of the impact of payment card interchange fees on end users’ choice of payment methods," MPRA Paper 48088, University Library of Munich, Germany, revised 25 May 2013.
    8. Aniela BOJAN & Emilia-Anuta COROVEI & Ioan TRENCA, 2014. "Retail Payment And Economic Growth For Developed And Emerging European Countries," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 14, pages 119-127, December.
    9. Wilko Bolt, 2012. "Retail Payment Systems: Competition, Innovation, and Implications," DNB Working Papers 362, Netherlands Central Bank, Research Department.
    10. Anneke Kosse & David-Jan Jansen, 2011. "Choosing how to pay: the influence of home country habits," DNB Working Papers 328, Netherlands Central Bank, Research Department.
    11. repec:kap:openec:v:28:y:2017:i:3:d:10.1007_s11079-016-9412-1 is not listed on IDEAS
    12. O'Toole, Ronnie, 2013. "The Usage, Cost and Pricing of Retail Payments in Ireland," Quarterly Bulletin Articles, Central Bank of Ireland, pages 74-84, April.
    13. Donal G. MCKILLOP & Barry QUINN, 2015. "Web Adoption By Irish Credit Unions: Performance Implications," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 86(3), pages 421-443, September.
    14. Humphrey, David, 2009. "Payment scale economies, competition, and pricing," Working Paper Series 1136, European Central Bank.
    15. John Goddard & Donal McKillop & John Wilson, 2009. "Which Credit Unions are Acquired?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 36(2), pages 231-252, December.
    16. Jose Negrin & Diadelfa Ocampo & Alejandro de los Santos, 2009. "Recent innovations in inter-bank electronic payment system in Mexico: the role of regulation," IFC Bulletins chapters,in: Bank for International Settlements (ed.), Proceedings of the IFC Conference on "Measuring financial innovation and its impact", Basel, 26-27 August 2008, volume 31, pages 473-494 Bank for International Settlements.
    17. Iftekhar Hasan & Heiko Schmiedel & Liang Song, 2012. "Returns to Retail Banking and Payments," Journal of Financial Services Research, Springer;Western Finance Association, vol. 41(3), pages 163-195, June.
    18. repec:spr:fininn:v:2:y:2016:i:1:d:10.1186_s40854-016-0047-4 is not listed on IDEAS
    19. Wilko Bolt & Sujit Chakravorti, 2010. "Digitization of Retail Payment," DNB Working Papers 270, Netherlands Central Bank, Research Department.
    20. Stavins, Joanna, 2017. "How do consumers make their payment choices?," Research Data Report 17-1, Federal Reserve Bank of Boston.
    21. 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.
    22. Vânia G. Silva & Esmeralda A. Ramalho & Carlos R. Vieira, 2017. "The Use of Cheques in the European Union: A Cross-Country Analysis," Open Economies Review, Springer, vol. 28(3), pages 581-602, July.
    23. Hasan, Iftekhar & Schmiedel, Heiko & Song, Liang, 2010. "Return from retail banking and payments," Research Discussion Papers 3/2010, Bank of Finland.

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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