The mixed oligopoly of cross-border payment systems

It is important to have an efficient cross-border payment systems. This paper presents a model depicting cross-border payment systems as a mixed oligopoly. A private net settlement system that maximises profit competes with the central banks’ gross settlement system that maximises welfare. It may be optimal for the central bank system to encourage increased use of the private system by charging fees that exceed the marginal cost. The central bank system is not only a competitor but also an essential service provider, because central bank money is needed for net settlement of payments in the private system….

Author: Karlo Kauko

Source: Research Discussion Papers, Bank of Finland

Download URL 2: Visit Now

Leave a Comment