Research Discussion Papers, Bank of Finland
Payment systems efficiency, policy approaches, and the role of the central bank
Abstract: Central bank spending on the operation of inter-bank funds
transfer systems may range from below one million to nearly a billion US
dollars annually. This paper examines how such costs are incurred and
recovered to pursue payment systems efficiency in different countries and
under alternative policy approaches. The key findings are as follows.
First, strong scale economy effects were found, with unit costs
comparatively lower in retail than large-value payment services, while
subsidisation was also evident in a survey of thirty-one payment systems.
Second, the minimalist approach was more efficiency enhancing than the
competitive and public service policy alternatives, due to higher
cost-reducing effects, stronger private sector involvement, and the
avoidance of the central bank’s conflicting role as regulator and service
provider in the payments system. And third, regulatory and financial
innovations, in addition to technological means, are found to be equally
important policy tools that the central bank may adopt to improve the
technical and economic efficiency of payment systems.
Keywords: payment systems; efficiency; cost; revenues; innovations; (follow links to similar papers)
72 pages, January 15, 2003
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