A Conceptual-Empirical Study of the Role of Regulation in Promoting a Single Euro Payments Area
E Harmonization of retail payments and the case of SEPA 133
133 E Harmonization of retail payments and the case of SEPA 1. Relevance for retail banking integration This chapter provides an illustrative application of the conceptual model for as- sessing the benefits of EU banking regulation. It focuses on the European retail payment market, a submarket of the overall retail banking market, and on the Single Euro Payments Area (SEPA) initiative, which emerged as banking indus- try-led response to the EU price regulation in 2003. While the operation of pay- ments systems has increasingly gained public and academic attention, the focus remained on systemic risk and efficiency issues of large-value, interbank pay- ment systems.76 Systemic risk arises because the insolvency of a major partici- pant in a payment system may impose costs on other participants through a loss of liquidity or, in an extreme example, a collapse of the system itself. In this re- gard, the payment system’s public good characteristics have been the basis of any case for public policy intervention in payment systems (Ganguly & Milne, 2002, p. 2). There is a very small amount of literature available on retail pay- ment systems as a network industry, where in particular the competition- cooperation nexus and respective policy implications are analyzed (see, for ex- ample, Kemppainen, 2004a; McAndrews & Rob, 1996). However, even less ac- ademic attention has been paid to the economic and political justification of reg- ulation and public policy intervention in order to create a single market for retail payments. Recent developments in the European integration process have...
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