Abstract
Problem statement: The Single Euro Payments Area (SEPA) project plans to establish an integrated market for extending European integration to retail payments; it aims to provide incentives for using payment systems instead of cash for all micro payments, in order to improve both efficiency and competition in the Euro area. In this study we described the SEPA and its effects on competition and innovation in the payment systems. Moreover, we will discuss the main technological innovations (particularly mobile payments, biometrics payments and smart cards) and their impacts on retail payments. Approach: In order to analyze the impact of new technologies on cash usage we employed a mathematical model. This model is an extension of duopolistic competition to three market players; it allows analyzing market changes caused both by SEPA and technological innovations. Results: Our numerical simulations showed that new technologies cause a reduction of cash usage, such as SEPA project states. Conclusion: New payment technologies provided new benefits than the traditional payment systems. These new technologies reduced the transaction times and the logistic costs of cash management; moreover they improve the transactions safety, their easiness and convenience. Such benefits push consumers to use these new payment technologies for micro-payments (pubs and bars, nightclubs, fast food outlets, retail fuel, convenience store and vending machines), thus reducing the use of cash such as SEPA project states.
Highlights
From 2002 cash stocks have been constantly increasing
Such cash stocks represent a buffer in order to deal with possible variations in cash demand; they are necessary for substituting void cash, for dealing with demand peaks and for optimizing the cash transportation among the several National Central Banks in the Euro area
We focus on the impact of logistic and technological benefits provided by new payment systems on the cash usage and we conclude the study with some observations and comments
Summary
At the end of 2007, the number of circulating banknotes was 12.1 billion and their value was 676.6 billion Euros; these data, compared to the data of late 2006, show an increase of 6.7% in volume and 7.7% in value. Cash produced annually has to be sufficient in order to enable transactions increase, to manage cash replacement rate and to provide cash stocks of the National Central Banks in each European member state. Such cash stocks represent a buffer in order to deal with possible variations in cash demand; they are necessary for substituting void cash, for dealing with demand peaks and for optimizing the cash transportation among the several National Central Banks in the Euro area (www.ecb.int)
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
