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Payment scale economies, competition, and pricing

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  • Humphrey, David

Abstract

Payment scale economies affect banking costs, competition in payment services, and pricing. Our scale measure relates operating cost to physical measures of European banking "output", finding large economies. This differs from relating total cost to the value of balance sheet assets (the conventional approach). Interest expenses are excluded since differences here are primarily due to mix, not scale. Also, since standard indicators of competition can give inconsistent results, a revenue-based frontier measure is developed and applied to European banks, with little difference evident across countries. Existing differences in bank prices (EC report) are associated with small differences in competition. JEL Classification: E41, C53

Suggested Citation

  • Humphrey, David, 2009. "Payment scale economies, competition, and pricing," Working Paper Series 1136, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20091136
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1136.pdf
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    References listed on IDEAS

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    6. 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.
    7. 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.
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    11. 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.
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    Cited by:

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    2. Biagio Bossone, 2021. "Bank Money Creation and the Payments System," Working Papers PKWP2117, Post Keynesian Economics Society (PKES).
    3. Verdier, Marianne, 2024. "Digital payments and bank competition," Journal of Financial Stability, Elsevier, vol. 73(C).
    4. Bita Shabgard, 2021. "Single euro payment area (SEPA) and banking industry: discriminatory pricing vs. non-discriminatory pricing," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 48(3), pages 355-383, September.
    5. Leonardo Gambacorta & Adrian van Rixtel, 2013. "Structural bank regulation initiatives: approaches and implications," BANCARIA, Bancaria Editrice, vol. 6, pages 14-27, June.
    6. Labye, Agnès, 2013. "Quel avenir pour la banque universelle? Une analyse empirique appliquée à la zone euro," L'Actualité Economique, Société Canadienne de Science Economique, vol. 89(1), pages 57-86, Mars.
    7. Biagio Bossone, 2021. "Bank Seigniorage in a Monetary Production Economy," Working Papers PKWP2111, Post Keynesian Economics Society (PKES).

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    More about this item

    Keywords

    bank competition; European banks; frontier analysis; payment scale economies;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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