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Study: The social costs of retail payments instruments in Portugal

Banco de Portugal publishes today its study on “The social costs of retail payments instruments in Portugal” (Os custos sociais dos instrumentos de pagamento de retalho em Portugal).

This study examines costs borne in 2009 by all stakeholders – banks and infrastructures/processors, merchants, non-financial corporations and Banco de Portugal itself – when providing retail payment instruments in Portugal (cash, cheques, debit and credit cards, direct debits and credit transfers).

It is crucial to know the costs stemming from the use of retail payment instruments in order to foster a more efficient utilisation of these instruments, which is one of the tasks assigned to the Bank.

Main findings:

  1. Private costs incurred by the banking sectorwith the provision of payment instruments were estimated at €1,259.7 million, i.e. 0.79% of the country’s gross domestic product (GDP) in 2009. Revenues were valued at €904.2 million (0.57% of GDP), bringing the coverage rate to 71.8%. Therefore, the mere provision of payment instruments entails a cross-subsidisation with other products and services offered by the banking sector;
  2. For banks, debit cards, credit cards and direct debits were the only payment instruments whose revenues covered the costs borne with their use;
  3. The estimated unit costs associated with the provision of each payment instrument stand at €0.15 per payment made with cash, €0.17 per direct debit instruction, €0.35 per debit card transaction; €0.36 per credit transfer ordered; €1.54 per cheque presented and €1.75 per credit card transaction. The low unit cost of cash are due to the high volume of payments made with banknotes and coins;
  4. Private costs borne by merchantswith the acceptance of the various payment instruments were estimated at €3,086.6 million, i.e. 1.93% of GDP;
  5. As regards payment means used in points of sale, and in terms of unit costs, credit cards were the most expensive instrument for merchants (€1.34 per payment) and debit cards were the least expensive (€0.32 per payment). Each cash payment cost €0.99 to merchants, i.e. more than debit card payments. Each cheque accepted generated a cost of €0.59, i.e. below the unit costs of cash and credit cards. In remote payments, the unit cost of each credit transfer received (€0.33) stood very close to that underlying each direct debit charged (€0.30);
  6. It is estimated that, in 2009, social costs of retail payment instruments totalled €2,204.3 million (1.38% of GDP); 57.1% of these costs having been borne by banks and the remaining 42.9% by merchants;
  7. Cash was the payment instrument with the highest costs to society (48% of total costs): €1,057.8 million (0.66% of GDP). Merchants incurred more costs with cash than banks (64%, compared with 36%);
  8. The least expensive payment instruments to society were direct debits and credit transfers (€160 million, i.e. 0.1% of GDP). These payment instruments also presented the most balanced allocation of social costs between banks and merchants;
  9. Debit cards cost €403.1 million and credit cards cost €309.7 million to society (as a whole, 0.44% of GDP). These costs were largely borne by banks (73.4% on debit cards and 80.8% on credit cards). In terms of share, banks incurred more costs with payment cards than with cash;
  10.  In payments made in points of sale, cash had the lowest social costs (€0.42), followed by debit cards (€0.47). However, it cannot be concluded that cash is the most efficient payment instrument to society, given that the low unit costs may be due to the high number of payments made;
  11.  Each credit card payment cost €2.12 to society, virtually the same as a payment with cheque (€2.13), which is the most expensive payment instrument;
  12.  Direct debits had lower unit costs to society (€0.35) than credit transfers (€0.68);
  13.  As a percentage of GDP, social costs of payment instruments in Portugal are overall higher than the average of countries participating in the European study on this matter promoted by the ECB, where 13 central banks participated (particularly focusing on costs of payment cards and cash); however, as regards unit costs, the situation is clearly more favourable for all payment instruments under review..


Banco de Portugal is entrusted with the task of regulating, monitoring and promoting the smooth functioning of payment systems.

The study now released updates the study on “Retail Payment Instruments in Portugal: Costs and Benefits”, published in 2007 (featuring 2005 data) and where Banco de Portugal examined, for the first time, costs borne by the Portuguese banking system with the provision of retail payment instruments.

In addition to costs incurred by the banking system, this second study analyses charges borne by the remaining stakeholders in the provision of payment instruments: merchants, non-financial corporations and Banco de Portugal itself.

Given that there are differences as regards their scope and methodology, it is not possible to make a direct comparison between both studies.

Lisbon, 25 July 2013