Transaction Pricing and the Adoption of Electronic Payments: A Cross-Country Comparison

Abstract

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.

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