Journal of Financial Market Infrastructures

Welcome to the concluding issue of the fourth volume of The Journal of Financial Market Infrastructures.

The first two papers in this issue both focus on a particular segment of the payments landscape: card payments. The first paper, entitled "The cost of cash and debit cards in Austria", by Hanns A. Abele and Guido K. Schaefer, adds to the strand of literature on the cost of retail payments instruments. This paper analyzes the cost of cash and debit cards in Austria both in terms of unit costs and scaled to the gross domestic product. It finds that the cost of cash amounts to 0.36% of GDP while the cost of debit cards is about 0.05% of GDP. Notwithstanding a strong preference for cash in Austria compared with the Scandinavian countries and the Netherlands, the Austrian debit card system is relatively cost-efficient, relying on centralization and international outsourcing.

The second paper in this issue, by Angelika Welte, is entitled "Wait a minute: the efficacy of discounting versus nonpecuniary payment steering". This paper investigates to what extent it is possible to steer consumers away from using credit cards by two different methods: offering discounts on the use of cash/debit cards, and nonfinancial incentives such as convenience and speed of the transaction. The paper provides results from microdata from a survey of Canadian households. The author finds that the window for discounts is too small to be effective and because the discount subsidizes a large portion of consumers who are already using cash and debit cards. The nonfinancial incentives may play an effective role for transactions above C$25.

"Not all payments are created equal: segmenting the payment landscape" by Gottfried Leibbrandt is the third paper in this issue, and provides a broad perspective by taking into account payments globally in a comprehensive way: from card payments to real-time gross settlement.We are currently seeing profound changes taking place in the global payments landscape through new technologies such as distributed ledger and through new entrants that may challenge the role of banks. The author analyzes this landscape by decomposing it into several segments along the volume and value dimensions in a dynamic context. It is argued that most changes happen to take place within the identified segments and much less so across segments. The main explanation comes from the observation that segments have inherently different characteristics.

For the last paper in this issue we turn to theworld of mandatory central clearing and interoperability. The paper, entitled "The challenges of derivatives central counterparty interoperability arrangements", by John McPartland and Rebecca Lewis, studies a relevant policy question: does interoperability of cash equity CCPs also imply that it is beneficial to introduce interoperability for derivative CCPs? After all, there is an
interoperability arrangement in place among three European CCPs for cash equity clearing. The authors argue that the answer to the question should be negative. In their line of reasoning they first set out the important difference between cash equity CCPs and derivatives CCPs. They then argue that interoperability for derivatives clearing would require substantial concentration margin levels for both linked CCPs, for which no obvious funding sources seem available, if compliance with the Margin Principle (number 6 of the Principles for Financial Market Infrastructures of CPMI-IOSCO) is to be achieved.

I hope you enjoy reading this issue of The Journal of Financial Market Infrastructures.

Ron Berndsen
De Nederlandsche Bank and Tilburg University

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