Costs of payment instruments on the Polish market broken down into fixed costs and variable costs

In the years 2019-2020, NBP implemented the Research project on the costs of payment instruments on the Polish market broken down into fixed costs and variable costs. It is a continuation of the study carried out in 2015-2018, which resulted in an estimate of the costs of payment instruments on the Polish market for 2015 – both social costs (total costs associated with the functioning of payment instruments incurred by all participants in the payment chain, excluding fees and commissions incurred for the benefit of other participants of this payment chain) and private costs (total costs incurred by the surveyed participant, including fees and commissions incurred by that participant for the benefit of other entities).

The aim of the new research project was to estimate costs of payment instruments on the Polish market broken down into fixed and variable costs based on the data obtained for 2015 and adopting cost drivers as in 2018.

Between 2015 and 2018, social costs increased by PLN 2.82 billion (i.e. 12.4%) and amounted to PLN 25.6 billion (if the seigniorage was taken into account, they would amount to PLN 22.5 billion), while the share of social costs in total costs between 2015 and 2018 decreased by 0.03 percentage point.

In accordance with the survey result, fixed costs of payment instruments increased from PLN 11.51 billion in 2015 to PLN 12.61 billion in 2018 (by PLN 1.1 billion, i.e. 9.5%). Variable costs also increased from PLN 18.52 billion to PLN 21.26 billion (i.e. 14.8%).

The survey shows that in terms of unit costs, the estimated private cost of a single retail transaction in 2018 amounted to PLN 1.73, which means a decrease in relation to 2015 by 2.5% (from PLN 1.78). The social costs of a single retail transaction were also reduced – from PLN 1.35 in 2015 to PLN 1.31 in 2018 (i.e. a decline by 2.9%). If the seigniorage was taken into account, these costs would also decrease from PLN 1.21 in 2015 to PLN 1.15 in 2018 (i.e. by 4.7%).

From the perspective of social costs, credit transfers turned out to be the cheapest payment instrument in 2018 with the cost of PLN 0.83. For cash, unit costs amounted to PLN 1.36 (PLN 1.11 if the seigniorage was taken into account) and decreased by PLN 0.02, i.e. by PLN 1.4% (if the seigniorage was taken into account, they decreased by PLN 0.07, i.e. 6.1%), for debit cards – by PLN 1.4 (a decline by PLN 0.4, i.e. 22.1%) whereas for credit cards – by PLN 2.1 (a decline by PLN 0.15, i.e. 6.5%). The highest decline in unit costs of all payment instruments covered by the survey was recorded for mobile payments, with their cost estimated at PLN 2.48, which means a decrease by PLN 4.21 (i.e. 63%) compared to 2015. On the other hand, direct debits saw the highest increase in unit costs – by PLN 2.12, which means that in 2018 they amounted to PLN 4.8 (i.e. an increase by 79.2%).

Investigating the costs incurred by individual entities in the payment chain, the so-called private costs, is a complicated task, but it is even more difficult to examine the total costs of a given payment instrument from the point of view of all the entities mentioned above as well as the internal costs incurred by them, i.e. the so-called social costs. However, to complete the cost picture, it is necessary to calculate fixed and variable costs, which allows, among others, to estimate costs for various scenarios of market development, depending on the changing cost drivers.

In addition to security, speed, convenience, anonymity or the universality of possession and acceptance, cost is only one of the factors determining the choice of a payment instrument for making or accepting a retail payment. The choice of payment instrument should be left to the discretion of consumers or traders. At this point, it should also be stressed that it is important to enable access to different payment methods (cash and non-cash) corresponding to the preferences of different users of payment instruments. It is also important from the point of view of broadly understood security of payments since in the case of failures, technical problems or in emergency situations (e.g. threat to the state security or epidemic threat, an example of which is the SARS-CoV-2 pandemic) such diversification of access and acceptance of payment instruments enables easier substitution of the aforementioned instruments. It should therefore be emphasised that the co-existence of different means of payment (including cash and non-cash) in the economy is important.

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