by Wilko Bolta, David Humphreyb and Roland Uittenbogaarda
After safety, the efficiency of a nation's payment system is a primary concern of central banks. Since electronic payments are typically cheaper than paper-based or cash payments, pricing these transactions should speed up the shift to electronics. But by how much? Norway explicitly priced point-of-sale and bill-payment transactions and rapidly shifted to electronic payments, while the Netherlands experienced a similar shift without pricing. Controlling for terminal availability and differences between countries, direct pricing accelerated the shift to electronics by about 20 percent. The quid pro quo was the elimination of bank-float revenues.
JEL Codes: D12, G21.
Full article (PDF, 35 pages 251 kb)
a De Nederlandsche Bank
b Florida State University