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Wilko Bolt

26 July 2005
WORKING PAPER SERIES - No. 505
Details
Abstract
This paper discusses various theoretic concepts which play a role in assessing the public benefits of Target, the large value RTGS payment network operated by the Eurosystem. These concepts touch upon natural monopoly, network externalities, competition and contestability, as well as economies of scale and scope. The existence of a natural monopoly provides a rationale for a temporary partial or full subsidy in order for Target to achieve the 'most efficient scale' or apply the most efficient technology to lower unit costs. Such a subsidy could be implemented through temporary 'penetration' pricing. Based on empirical results for the Federal Reserve's payment system (Fedwire), it is further argued that if Target decided to standardize its operating platforms and consolidate its processing sites into one or a few centers, it too could realize strong scale economy benefits and lower unit costs.
JEL Code
G20 : Financial Economics→Financial Institutions and Services→General
H41 : Public Economics→Publicly Provided Goods→Public Goods
L10 : Industrial Organization→Market Structure, Firm Strategy, and Market Performance→General
30 December 2009
WORKING PAPER SERIES - No. 1140
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Abstract
This paper analyses the welfare implications of creating a Single Euro Payments Area. We study the effects of increased network compatibility and payment scale economies on consumer and merchant card fees and its impact on card usage. In particular, we model competition among debit cards and between debit and credit cards. We show that competitive pressures dampen merchant fees and increase total card acceptance. The paper argues that there is room for multilateral interchange fee arrangements to achieve optimal consumer and merchant fees, taking safety, income uncertainty, default risk, merchant's pricing power, and the avoided cost of cash at the retailers side into account. Consumers and merchants are likely to benefit the most from the creation of SEPA when sufficient payment card competition alleviates potential monopolistic tendencies.
JEL Code
L11 : Industrial Organization→Market Structure, Firm Strategy, and Market Performance→Production, Pricing, and Market Structure, Size Distribution of Firms
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
D53 : Microeconomics→General Equilibrium and Disequilibrium→Financial Markets
Network
Retail payments: integration & innovation
28 October 2011
WORKING PAPER SERIES - No. 1387
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Abstract
We consider debit and credit card networks. Our contribution is to introduce the role of consumer credit into these payment networks, and to assess the way this affects competition and equilibrium fees. We analyse a situation in which overdrafts are associated with current accounts and debit cards, and larger credit lines with
JEL Code
L11 : Industrial Organization→Market Structure, Firm Strategy, and Market Performance→Production, Pricing, and Market Structure, Size Distribution of Firms
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
D53 : Microeconomics→General Equilibrium and Disequilibrium→Financial Markets
Network
Conference on the future of retail payments: opportunities and challenges
24 April 2013
WORKING PAPER SERIES - No. 1539
Details
Abstract
Banks supply payment services that underpin the smooth operation of the economy. To ensure an efficient payment system, it is important to maintain competition among payment service providers but data available to gauge the degree of competition are quite limited. We propose and implement a frontierbased method to assess relative competition in bank-provided payment services. Billion dollar banks account for around ninety percent of assets in the US and those with around to billion in assets turn out to be both the most and the least competitive in payment services, not the very largest banks.
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
L80 : Industrial Organization→Industry Studies: Services→General
L00 : Industrial Organization→General→General