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Intraday two-part tariff in payment systems

Author

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  • Ota, Tomohiro

    () (Bank of England)

Abstract

This paper studies the optimal intraday pricing in payment systems and its impact on banks’ payment behaviour and intraday liquidity management. A model is developed to compare the performance of two different mechanisms to reduce payment delay: a throughput guideline and a tariff that varies over time, and concludes that a linear time-varying tariff achieves a better outcome unless the payment system experiences a system-wide liquidity shock. We show that settlement delay can be socially efficient, contrary to general understanding of the literature, when it reduces the aggregate cost of liquidity. The theoretical model suggests that the tariff eliminates the inefficient settlement delay that does not contribute to lowering the cost, while leaving the socially efficient delay.

Suggested Citation

  • Ota, Tomohiro, 2011. "Intraday two-part tariff in payment systems," Bank of England working papers 428, Bank of England.
    • Handle: RePEc:boe:boeewp:0428
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    File URL: https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2011/intraday-two-part-tariff-in-payment-systems.pdf
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    References listed on IDEAS

    as
    1. Olivier Armantier & Jeffrey Arnold & James J. McAndrews, 2008. "Changes in the timing distribution of Fedwire funds transfers," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 83-112.
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    Cited by:

    1. Thomas Nellen, 2015. "Collateralised liquidity, two-part tariff and settlement coordination," Working Papers 2015-13, Swiss National Bank.
    2. Robert Oleschak & Thomas Nellen, 2013. "Does SIC need a heart pacemaker?," Working Papers 2013-10, Swiss National Bank.

    More about this item

    Keywords

    Payment; RTGS; two-part tariff; throughput guideline;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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