The Social Cost Of Payments In Europe

The ECB released a report last week analyzing the social and private costs of different payment methods in 13 countries members of the European System of Central Banks. The main finding of this report is that payment instruments cost an astonishing €45 billion, which amounts roughly to 0,9% GDP for those 13 countries. If extrapolated to all 27 members, it would amount to €130 billion, and 1% GDP. These costs are shared mostly by banks (50%) and retailers (46%) while social costs for central banks and cash-in-transit companies account for 3% and 1% respectively. However, retailers bear more costs than banks as they have other external costs to be paid to other payment chain participants. This report was accompanied by the news that as the deadline for SEPA migration approaches, European companies could lose billions due to simple payment errors. The lack of correct data for SEPA transfers is responsible for the errors that could cost companies up to €20 billion a year.

Perhaps as importantly as the costs of payment intruments in the European Union, the report also provides the distribution of payment methods among the thirteen countries. There is a clear preference for cash in low-income countries such as Greece (94 %) or Spain (77%), which, in average, constitutes over half the payments in the European Union. The card remains strong, especially in the Nordic countries and constitutes most of non-cash payments. The cheque is clearly becoming obsolete, except for rare cases.

What might be missing from this report is the costs incurred by those who use them – consumers. While it might be a study for individual countries as the payments landscapes changes a lot from country to country – it might be interesting to know if costs influence payment choice, especially in a time when the European Union is going through such a hard political and economic crisis.