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Payment Network Scale Economies, SEPA, and Cash Replacement

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  • Bolt Wilko

    (Research Department, De Nederlandsche Bank, The Netherlands)

  • Humphrey David

    (Department of Finance, Florida State University, Tallahassee, FL, U.S.A.)

Abstract

The goal of SEPA (Single Euro Payments Area) is to facilitate the emergence of a competitive, intra-European market by making cross-border payments as easy as domestic transactions. With cross-border inter-operability for electronic payments, card transactions will increasingly replace cash and checks for all types of payments. Using different methods, we estimate card and other payment network scale economies for Europe. These indicate substantial cost efficiency gains if processing is consolidated across borders rather than "piggy-backed" onto existing national operations. Cost reductions likely to induce greater replacement of small value cash transactions are also illustrated.

Suggested Citation

  • 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.
    • Handle: RePEc:bpj:rneart:v:6:y:2007:i:4:n:2
    DOI: 10.2202/1446-9022.1129
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