Scandinavian Working Papers in Economics

Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)

No 172: Do Prices Reflect Costs? A study of the price- and cost structure of retail payment services in the Swedish banking sector 2002

Gabriela Guibourg () and Björn Segendorf ()
Additional contact information
Gabriela Guibourg: Financial Stability Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Björn Segendorf: Financial Stability Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden

Abstract: We estimate private costs in the Swedish banking sector for the production of payment services and investigate to what extent the price structure reflects the estimated cost structure. We find that (i) banks tend to use two-part tariffs but (ii) variable costs are poorly reflected in transaction fees towards both consumers and corporate customers. (iii) there exist large cross subsidies between different payment services, foremost from acquiring card payments to cash distribution to the public, while payment services as a whole is not subsidized.

Keywords: retail payments; two-part tariffs; private costs; price structure; economies of scale

JEL-codes: E58; G21; L11; L13; L14; L89

26 pages, October 1, 2004

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