Debit Cards Promoted For Europe's SEPA Mandate
Cash accounts for over 70 per cent of transactions in Europe, at a total cost of Ç50 billion per year, according to MasterCard Europe, which recently launched a cash replacement strategy. With EuropeÆs retail banking industry accounting for Ç32 billion of the Ç50 billion cost of using cash, debit cards, as an efficient payment instrument, could significantly reduce these costs. MasterCardÆs promotion of debit cards as a cash replacement mechanism is fueled by European Payments Council estimates that the cost of cash to society runs at 0.6 per cent of total EU GDP.Banks and retailers bear most of this cost, with the Netherlands identified as having the potential to achieve Ç100 million in savings if its debit card and e-purse transaction volume was doubled, according to a March 2004 survey by MOB Rapport Kostenonderzoek Toonbankbetaalproducten. By 2008, the European Union is to conclude its Single European Payments Area (SEPA) projects under mandates from the European Central Bank to harmonize eurozone payments, and recent bank industry moves towards a SEPA for debit cards have been welcomed by MasterCard.
MasterCard claims to have SEPA-enabled its debit card brand, Maestro, which is held by 250 million cardholders in Europe, and accepted by almost 5 million merchants. Visa similarly launched its pan-European debit solution, V Pay, in December 2004 to support the convergence of EuropeÆs disparate debit card systems in line with SEPA mandates. V Pay is said to provide a marginal cost reduction per transaction of Ç0.01 to Ç0.02 and to have potential for economies of scale as transactions per debit card increase from the current 120 per year, to a predicted 240. Related Links:
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