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Efficiency and costs of payments: Some new evidence Takala and Viren (2007)

Efficiency and costs of payments: Some new evidence Takala and Viren (2007). Discussant Heiko Schmiedel European Central Bank Economics of Payment Systems Conference, Paris 25-26 October 2007. Agenda. Scope of paper Conceptual framework Results and conclusions Some remarks.

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Efficiency and costs of payments: Some new evidence Takala and Viren (2007)

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  1. Efficiency and costs of payments:Some new evidenceTakala and Viren (2007) Discussant Heiko SchmiedelEuropean Central Bank Economics of Payment Systems Conference,Paris 25-26 October 2007

  2. Agenda • Scope of paper • Conceptual framework • Results and conclusions • Some remarks

  3. 1. Scope of paper • Research issues: • Costs of different payment instruments • Choice of payment instrument → Case of cash! Evidence from Finland • Place in literature: • Review of available literature: • Social cost of payment system • Cost of cash alone • Innovation: Inclusion of retail sector

  4. ??? CashCost = ∑ CB, Banks, Retail Productioncost 2. Conceptual framework • Choice between different payment instruments: • Cash ↓ , Cards ↑ , not cashless • 10 EUR Break-off point: cash vs. Cards • Calculation cost of cash: • Retail business costs: • EPC: Retail costs 1/3 of total cost of cash • Cash vs. card payment costs

  5. 3. Results and conclusion • Cost of cash: 0.12-0.18% of GDP • Cost of cash = cost of cards • Total costs of payments less than always thought! • New pricing: • First-mover disadvantage • Cooperation may not be feasible • Potential efficiency gains, e.g. economies of scale and scope • Social cost unevenly distributed

  6. 4. Some remarks • Conclusion and policy considerations • Convergence cash supply services • Cost of cash – a non-issue ! • Finland → “cash” countries ? • ECB (2007) SEPA economic impact study • Cash is the “bleeder” in all markets • Cross-subsidization • Repositioning of cash • Additional literature • Bergman/Guibourg/Segendorf (2007) • Bolt & Humphrey (2006)

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