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Social costs of POS payments in the Netherlands 2002-2012: Efficiency gains from increased debit card usage

  • Nicole Jonker

The overall costs of the payment system to society are considerable. These costs depend on the relative usage of the available payment instruments, which differ in the costs that each entails to market participants in the payment chain. In the Netherlands, debit card payments have become less costly than cash payments. In 2012 an average cash payment cost EUR 0.44 whereas an average debit card payment cost EUR 0.30. Between 2002 and 2012, the number of debit card payments more than doubled to 2.5 billion, while cash usage declined to 3.75 billion payments. As a result of the changing payment behaviour of the Dutch, the total costs of cash and debit card payments to society declined by 10% from over EUR 2.6 billion in 2002 to less than EUR 2.4 billion in 2012. Relative to GDP, the social costs dropped from 0.57% to 0.40% of GDP. The costs incurred by banks for cash and debit card payments have been rather stable. Retailers, on the other hand, have achieved major cost reductions. The trend towards more card and less cash usage is expected to continue. From a cost perspective this will be beneficial for society as a whole.

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Paper provided by Netherlands Central Bank, Research Department in its series DNB Occasional Studies with number 1102.

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Date of creation: Apr 2013
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Handle: RePEc:dnb:dnbocs:1102
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Web page: http://www.dnb.nl/en/

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  1. Bolt Wilko & Humphrey David, 2007. "Payment Network Scale Economies, SEPA, and Cash Replacement," Review of Network Economics, De Gruyter, vol. 6(4), pages 1-21, December.
  2. Ten Raa, T. & Shestalova, V., 2004. "Empirical evidence on payment media costs and switch points," Other publications TiSEM a0277140-f50e-4a02-9448-3, Tilburg University, School of Economics and Management.
  3. Anikó Turján & Éva Divéki & Éva Keszy-Harmath & Gergely Kóczán & Kristóf Takács, 2011. "Nothing is free: a survey of the social cost of the main payment instruments in Hungary," MNB Occasional Papers 2011/93, Magyar Nemzeti Bank (the central bank of Hungary).
  4. Jonker Nicole, 2011. "Card Acceptance and Surcharging: the Role of Costs and Competition," Review of Network Economics, De Gruyter, vol. 10(2), pages 1-35, June.
  5. ten Raa, Thijs & Shestalova, Victoria, 2004. "Empirical evidence on payment media costs and switch points," Journal of Banking & Finance, Elsevier, vol. 28(1), pages 203-213, January.
  6. Garcia-Swartz Daniel D. & Hahn Robert W. & Layne-Farrar Anne, 2006. "The Move Toward a Cashless Society: Calculating the Costs and Benefits," Review of Network Economics, De Gruyter, vol. 5(2), pages 1-30, June.
  7. Hans Brits & Carlo Winder, 2005. "Payments are no free lunch," DNB Occasional Studies 302, Netherlands Central Bank, Research Department.
  8. Nicole Jonker & Anneke Kosse & Lola Hern�ndez, 2012. "Cash usage in the Netherlands: How much, where, when, who and whenever one wants?," DNB Occasional Studies 1002, Netherlands Central Bank, Research Department.
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