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A Methodological Toolkit to Reform Payment Systems: An Example of Applied Cost-Benefit Analysis

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Listed:
  • Alberto Casagrande
  • Marco Spallone
  • Pina Murè

Abstract

In principle, a careful evaluation of costs and benefits should be a wise rule for everyone who has to take any important decision. In particular, it is very important when a payment system reform is at stake. Since many stakeholders are involved in a payment system reform, the final decisions are going to be the result of several cost-benefit analyses and of “negotiation†among economic agents, in particular system providers, system participants, and end users. In this paper we will only focus on cost-benefit analysis, providing both theoretical guidelines and numerical examples. We conclude that past evaluations of payment system reforms mainly focused on qualitative assessments, hence overlooking quantitative ones. So, we suggest that it would be worthy for international institutions to spend some efforts to build, manage and make available to all countries a database on payments systems, with both relevant data and methods to assess costs and benefits. JEL classification numbers: G21, G23, G28

Suggested Citation

  • Alberto Casagrande & Marco Spallone & Pina Murè, 2018. "A Methodological Toolkit to Reform Payment Systems: An Example of Applied Cost-Benefit Analysis," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 8(4), pages 1-3.
    • Handle: RePEc:spt:apfiba:v:8:y:2018:i:4:f:8_4_3
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    References listed on IDEAS

    as
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    3. Julian Wright, 2004. "The Determinants of Optimal Interchange Fees in Payment Systems," Journal of Industrial Economics, Wiley Blackwell, vol. 52(1), pages 1-26, March.
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    6. Baxter, William F, 1983. "Bank Interchange of Transactional Paper: Legal and Economic Perspectives," Journal of Law and Economics, University of Chicago Press, vol. 26(3), pages 541-588, October.
    7. Robert J. Brent (ed.), 1996. "Applied Cost–Benefit Analysis," Books, Edward Elgar Publishing, number 629.
    8. Richard Schmalensee, 2002. "Payment Systems and Interchange Fees," Journal of Industrial Economics, Wiley Blackwell, vol. 50(2), pages 103-122, June.
    9. Oz Shy & Zhu Wang, 2011. "Why Do Payment Card Networks Charge Proportional Fees?," American Economic Review, American Economic Association, vol. 101(4), pages 1575-1590, June.
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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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