SEPA, efficiency, and payment card competition

Arbeitspapier

This paper analyzes 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 1140

Classification and Topics

• Classification: Wirtschaft ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; General Equilibrium and Disequilibrium: Financial Markets
• Subject: card network competition ; economic welfare ; Optimal pricing ; SEPA ; Bargeldloser Zahlungsverkehr ; Wohlfahrtsanalyse ; EU-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bolt, Wilko ; Schmiedel, Heiko
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/153574
• Last update: 10.03.2025, 11:44 AM CET