Working Paper

Payment network scale economies, SEPA, and cash replacement

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 crossborder inter-operability for electronic payments, card transactions will increasingly replace cash and checks for all types of payments. Using different methods, the authors estimate card and other payment network scale economies for Europe. These indicate substantial cost efficiency gains if processing is consolidated across borders rather than \"piggybacked\" onto existing national operations. Cost reductions likely to induce greater replacement of small value cash transactions are also illustrated.

Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Working Papers

Publication Date: 2007

Number: 07-32