Delivering deposit services: ATMs versus branches

Automated tellers ; Branch banks

The economics of electronic benefit transfer payments

Electronic funds transfers

Why do estimates of bank scale economies differ?

A number of public policy issues turn on whether or not there are scale economies in commercial banking. This paper examines why empirical tests in this area have yielded differing results. Sorting out the different methodological approaches enables us to develop general conclusions on the size and significance of scale economies in banking.Economies of scale ; Banks and banking - Costs ; Bank size

Productivity in banking and effects from deregulation

Over the last decade, banking productivity growth has been quite low, between 0.60 to –0.07 percent a year. Deregulation has served to raise banking costs but not measured output. Consumers may have benefited, but banks have not.Productivity ; Banks and banking

Efficiency of Financial Institutions: International Survey and Directions for Future Research

This paper surveys 130 studies that apply frontier efficiency analysis to financial institutions in 21 countries. The primary goals are to summarize and critically review empirical estimates of financial institution efficiency and to attempt to arrive at a consensus view. We find that the various efficiency methods do not necessarily yield consistent results and suggest some ways that these methods might be improved to bring about findings that are more consistent, accurate, and useful. Secondary goals are to address the implications of efficiency results for financial institutions in the areas of government policy, research, and managerial performance. Areas needing additional research are also outlined.

Intraday credit: risk, value, and pricing

An abstract for this article is not availableElectronic funds transfers ; Payment systems ; Overdrafts

Inefficiency and productivity growth in banking: a comparison of stochastic econometric and thick frontier methods

A comparison of alternative methods for estimating inefficiency and productivity growth in banking, showing that inefficiencies are sufficiently large to dominate scale economies and that measured technological progress has been small, or even negative, as a result of institutional events that occurred during 1977-88.Banks and banking - Costs ; Production (Economic theory)

Cost recovery and pricing of payment services

A modern payment system is essential for promoting domestic and international trade and exchange as well as developing financial markets. Payment users will be directed toward the most efficient payment methods when the costs of producing those services are reflected in the prices paid. Resources are being wasted in the United States because consumers see no important difference in transaction prices or bank costs between using a check or using electronic direct debit in paying a bill, even though the social costs of these two instruments are different. Electronic payments cost only a third to half as much as paper-based payments. An estimated $100 billion (or 1.5 percent of GDP) is being lost by the continued use of paper-based checks. When payment instruments are not appropriately priced, the costs must be covered elsewhere. One common solution is to let loan revenues cover part of payment expenses (keeping loan rates higher to compensate). When prices reflect the full cost of producing the service, users demand the services that use the fewest real resources. The authors give examples of payment prices and price schedules and show how underlying cost data are used to"build up"to a price. They outline how payment services may best be structured to: a) Appropriately reflect economies of scale or scope in the production of payment services; b) Adjust cost recovery percentages to accommodate how much demand conditions associated with start-up differ from those associated with mature operation. (During a new system's early years of operation, the transaction volume may be low and some form of underrecovery of costs may be required to encourage use of the system. But any such underrecovery must be built into future pricing arrangements oncethe systems are established and traffic volumes are at a level where full cost recovery is practical. To ensure fairness, the pricing structure must also guarantee that latecomers to the system not get more favorable treatment than the initial user group.); and c) Induce efficient use of scarce resources. They note the economic principles that recommend certain pricing methods over others and apply equally to payment services provided by the private sector or through a government agency. They show why costs should be recovered through user transaction fees.Banks&Banking Reform,Payment Systems&Infrastructure,Economic Theory&Research,Markets and Market Access,Decentralization,Payment Systems&Infrastructure,Economic Theory&Research,Banks&Banking Reform,Environmental Economics&Policies,Markets and Market Access

Consistency conditions for regulatory analysis of financial institutions: a comparison of frontier efficiency methods

We propose a set of consistency conditions that frontier efficiency measures should meet to be most useful for regulatory analysis or other purposes. The efficiency estimates should be consistent in their efficiency levels, rankings, and identification of best and worst firms, consistent over time and with competitive conditions in the market, and consistent with standard nonfrontier measures of performance. We provide evidence on these conditions by evaluating and comparing efficiency estimates on U.S. bank efficiency from variants of all four of the major approaches -- DEA, SFA, TFA, and DFA -- and find mixed results.Financial institutions ; Bank supervision