Costs in Inter-bank Funds Transfer Systems: an International Survey*

Central bank spending on the operation of inter-bank funds transfer systems may range from below one million to nearly a billion US dollars annually. This paper examines how such costs are incurred and recovered to pursue payment systems efficiency in different countries and under alternative policy approaches. The key findings suggest the following. First, strong scale economy effects were found, with unit costs comparatively lower in retail than largevalue payment services, while subsidisation was also evident in a survey of thirty-one payment systems. And second, the minimalist approach was more efficiency enhancing than the competitive and public service policy alternatives, due to higher cost-reducing effects, stronger private sector involvement, and the avoidance of the central bank's conflicting role as regulator and service provider in the payments system.