Estimating the Costs of Electronic Retail Payment Networks: A Cross-Country Meta Analysis

As economies across the world continue to digitize, debates around the design and efficiency of national infrastructures for electronic payments have gained added relevance. Central to these debates is the question of how many electronic funds transfer (EFT) systems can viably coexist within a jurisdiction while achieving scale economies to ensure that average cost is minimized, a threshold that largely depends on the shape of the cost function. In this paper, we conduct a cross-country meta-analysis using data from 13 social cost studies across 9 jurisdictions between 2001 and 2016. We quantitatively estimate a cost function relating the total transaction volume to the per-transaction cost and interpret its parameters in terms of fixed and variable costs. We find a rapidly decreasing, convex cost curve that plateaus quickly at around one billion annual transactions. Additionally, we estimate the marginal cost of an EFT to be approximately $0.55 per transaction, expressed in 2025 Canadian dollars, and the total fixed cost to be approximately $83 million per year.