Cost Savings from Electronic Payments and ATMs in Europe

Abstract

Electronic payments are considerably cheaper than their paperbased alternatives. Similarly, ATMs are a more cost-efficient way to deliver certain depositor services than are branch offices. As the share of electronic payments in 12 European countries rose from 0.43 in 1987 to 0.79 in 1999 and ATMs expanded while the number of branch offices was constant, bank operating costs are estimated to be $32 billion lower than they otherwise might have been, saving 0.38% of the 12 nations’ GDP. Our results are robust to the form of cost function estimated—composite, Fourier, or translog. (93 words)