Reducing payment processing costs: Scale economies and SEPA

Wilko Bolt and David Humphrey

Journal of Payments Strategy & Systems, 2008, vol. 2, issue 3, 250-258

Abstract: The drive towards a single euro payments area (SEPA) is to make cross-border payments just as easy as domestic payments. While this can be achieved by processing the (currently small) volume of cross-border transactions at existing processing centres, costs would be largely unchanged. Alternatively, owing to strong scale economies in processing electronic payments, costs can be markedly reduced if national level processing centres in Europe are consolidated across borders. Estimates of payment scale economies from different sources are presented and potential cost reductions in unit cost are illustrated. The average cost of a payment transaction could fall by upwards of 30 per cent if consolidation doubled processing volume.

Keywords: payment scale economies; European payments; SEPA (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:aza:jpss00:y:2008:v:2:i:3:p:250-258

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