01 October 2012

New ECB report examines the costs of making payments in the European Union

A new report released by the ECB analyses the social and private costs of making retail payments in 13 European countries and discovers that they are substantial, amounting to around €45 billion. If extrapolated to cover the 27 Member States of the EU, these costs would be around €130 billion.

The study is the first comprehensive cross-country analysis of the aggregated costs of making payments when purchasing goods and services. It was conducted by the ECB in cooperation with the central banks of Denmark, Estonia, Finland, Greece, Hungary, Ireland, Italy, Latvia, the Netherlands, Portugal, Romania, Spain and Sweden.

Based on a representative sample, the study finds that cash payments account for nearly half of the total costs. As the most commonly used payment instrument, cash has, on average, the lowest social costs per transaction, at €0.42, closely followed by debit cards with costs of €0.70 to society. Cheques are the most expensive form of payment, with unit costs of €3.55. However, in some countries, cash does not always have the lowest unit costs.

The report looks at the so-called private and social costs. Private costs are those incurred by individual participants in the payments chain – including items such as transportation of cash, management of electronic transactions, acquisition of new customers, credit risk analysis, provision of terminals, fraud prevention and fees for other participants. Social costs are defined as the aggregate costs to society as a whole, excluding fees and tariffs for participants in the payment chain. About half of these total costs are incurred by banks and interbank infrastructure providers, while retailers bear 46 per cent thereof.

“This study is a true joint venture of the ECB and the national central banks involved”, said Benoît Cœuré, Member of the ECB’s Executive Board. “Its results underline how much retail payment services matter for European society and in the economy as a whole. The study will shed light on the debate about how the European market for payment services will look in the future and how overall cost efficiency can be improved even further.”

Press release

Full report

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