Spain is the European country with a larger network of cash dispensers (about 56,000 at the beginning of 2005), and point of sale terminals (more than a million). In Spain there are more than 61.7 million credit and debit cards, although their degree of spreading is one of the great pending challenges of the financial industry in Spain and Europe. These are the conclusions of the article ‘Card payments, interchange rates and service commissions: economic implications for Spain, carried out by the professors of the Universidad de Granada Santiago Carbó and Francisco Rodríguez, in collaboration with Anthony Saunders, of the New York University, and published by ‘Papeles de Economía Española’, of the Saving Banks Foundations (FUNCAS).
The work has produced data of interest for Spanish economy: cash withdrawals prevail (22 transactions per inhabitant at the end of 2004) against the use of cards in points of sale (16.9 transactions per inhabitant). According to the authors, interchange rates in Spain have traditionally been higher than in Europe although they have fallen since 1999 (the maximum level was 3.5% in 1999).
This can be easily explained for the lower degree of spreading of these means of payment with regard to cash in comparison with other countries around us. Interchange rates reduction also redounds to the reduction of the discount rates charged to merchants. In December of 2005, card payment processor entities and merchant associations came to an agreement on the progressive reduction of the rates in five years; their reduction has been determined until 2008, when the average rate la will be 0.70%.
In Spain, the number of cards complete with a cash function almost doubled between1996 (33,189,000) and 2004 (63,027,000). However, the number of transactions made per cash dispenser reduced during the same period (from 19,121 in 1996 to 16,336 in 2004), although the volume of the transactions increased from 582 million euros to 905 million euros (a net increase of 55.5%).
Curiously, according to the researchers, the number of cash dispensers increased during the same period, from 30,437 to 55,399 (a net increase of 81.8%). It is to emphasize that the average value of the transactions made in cash dispensers increased from 38.5 euros in 1996 to 44.1 euros in 2004.
The development of the figures allows the authors to conclude that the use of cards, both in the short and in the long term, has a positive effect on consumption. On the contrary, their work also shows that the positive effect of consumption on the use of cards is much lower. Secondly, the commissions charged to merchants significantly reduced with consumption. Finally, there are important differences between the sectors and provinces in the level of card use and on the effects for rate fixing.
The results of this study seem to support the present price-fixing system in Spain, where collective determination seems to have benefited consumers through rates reduction (if there is a higher degree of cards use), and also merchants, increasing the rate of growth of their sales.
Reference: Prof Santiago Carbó Valverde. Dpt of Economic Theory and History of the Universidad de Granada. Phone numbers. 958 243 717 – 249 995 – 248 346. E-mail: scarbo@ugr.es
