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In summary of the above, we assumed the following changes on the side of the payment structure:

− the number of cash transactions declines by 950 million transactions from the current 2,835 million transactions to 1,885 million transactions, with an 850 million rise in the number of debit card payments and a 100 million rise in the number of electronic credit transfers;

− the number of paper-based credit transfers, postal inpayment money orders and postal outpayment money orders for pensions falls to zero with the result that the number of electronic credit transfers increases by a further 200 million transfers in addition to the above 100 million, from 230 million transfers to 530 million transfers, and the number of direct debits rise by 140 million transactions, from 77 million transactions to 217 million transactions;

− the number of debit card payments increase − as a result of the declining number of cash transactions − from the current 150 million payments to 1 billion payments.

On the basis of the hypothetically assumed payment structure, the individual unit costs fundamentally change as a result of the sharply varying ratios of fixed and variable costs of the specific payment instruments, and as a result, the unit cost of all payment transactions. In contrast to the current situation discussed under point 4.8, the chart below reveals the unit cost relating to the hypothetical situation (payment instruments in the growing order of unit costs, where we assumed a change in payments). In the hypothetical situation, debit card transactions, direct debits and electronic credit transfers would be cheapest on a social level, and the unit cost of all payment transactions would decrease from HUF 106 to HUF 78.

78 _{For the purpose of illustrating such types of problems, the survey conducted by MasterCard and bankkártya.hu in May 2010 (“The twenty thousand} bill is a problem in many stores”, 25 May 2010), relating to the acceptance of 20,000 forint banknotes, produced a shocking results: the purchase of goods in the value of less than HUF 3,000 failed in 40% of the visited Budapest stores because the store was not willing to exchange the twenty thousand banknote.

Had we attained this payment structure and cost structure in 2009, the following situation would have emerged per payment instrument.

chart 31

Unit costs changing in the hypothetical situation (HUF) 46 48 78 80 88 0 10 20 30 40 50 60 70 80 90 100 Debit car transactions

Direct debits Total Electronic credit transfers Cash transactions Source: MNB. Table 79

summary of the estimated hypothetical volume of the surveyed payment instruments and the related estimated hypothetical social costs

Payment instruments _{(in millions)}Number

Value (HUF billion) social costs (HUF billion)

social unit costs (HUF) share (%) based on per

transaction

per 100 Ft of payment

value

number value social costs

1. Cash transactions 1,885 15,322 166 87.81 1.08 51.5% 3.6% 58.2% 2. Debit card transactions 1,000 11,050 46 45.63 0.41 27.3% 2.6% 16.0% 3. Credit card transactions 25 200 20 796.18 9.76 0.7% 0.0% 6.9% 4. Credit transfers, of which 530 391,946 43 80.47 0.01 14.5% 93.1% 15.0% a) paper-based 0 0 0 n. a. n. a. 0.0% 0.0% 0.0% b) electronic 530 391,946 43 80.47 0.01 14.5% 93.1% 15.0% 5. B2B direct debits 1 507 1 918.75 0.16 0.0% 0.1% 0.3% 6. Direct debits 217 2,130 10 47.66 0.49 5.9% 0.5% 3.6% 7. Postal inpayment money orders 0 0 0 n. a. n. a. 0.0% 0.0% 0.0% 8. Postal outpayment money orders for

pensions 0 0 0 n. a. n. a. 0.0% 0.0% 0.0%

Total 3,658 421,156 285 77.78 0.07 100.0% 100.0% 100.0%

Social costs as % of GDP 1.09%

POTENTIAL SOCIAL SAVINGS (EFFICIENCY IMPROVEMENT) THROUGH THE MORE EFFICIENT...

The table above reveals the comparison of the current and the hypothetical situation; it is clear that the greatest social savings are expected in connection with debit card transactions in terms of both the absolute and relative value of unit costs.

Table 80

current and hypothetical social cost of main domestic payment instruments and the achievable social savings in current situation in hypothetical situation Absolute savings* relative savings* %

Social costs (HUF billion) 387.81 284.50 −103.31 −27%

Social costs/GDP (%) 1.49% 1.09% −0.40% n. a.

Unit costs for payment instruments (HUF)

Cash transactions 73.66 87.81 14.15 19%

Debit card transactions 201.13 45.63 −155.49 −77%

Electronic credit transfers 174.15 80.47 −93.68 −54%

Direct debits 100.39 47.66 −52.74 −53%

Total 106.01 77.78 −28.23 −27%

* with − sign: decrease in costs without sign: incerase in costs Source: MNB.

6.1 resUlTs OF FOreiGN sOciAl cOsT sUrVeys

The Norwegian, Swedish, Belgian, Dutch and Portuguese central banks conducted cost surveys in Europe, which we summarise below in relation to their methods, results and conclusions.

6.1.1 The Norwegian study

6.1.1.1 The method

The Norwegian central bank recently estimated the social cost of the group of cash, payment card and so-called giro81 transactions and their elements, updating and supplementing its estimates prepared (to a lesser extent) for 1988 and (to a larger extent) for 1994 and 2001. The methodology changed over time, as the recent survey was expanded to include cash services as well, and the findings of the cost surveys of European central banks (Swedish, Belgian, Dutch and Portuguese central bank) conducted between 2002 and 2007 were also taken into account.

The experts at the Norwegian central bank aimed at determining the current average costs relating to the entire economy, and they firmly held the view that costing should be based on total costs. It follows that they also aimed at quantifying overhead costs, or under a different approach, direct and indirect costs within the banking sector, and they did not see the need for the breakdown of costs into fixed and variable elements in the banking sector either. They did not carry out a break-even point calculation because in their view

− very many assumptions would have been necessary for marginal costing, which would have essentially limited the utility of the break-even point calculation;

− break-even point calculation considers fixed costs as already incurred, while the infrastructure needs to be implemented and that is not free in any case;

− there is probably no linear correlation between costs and transactions, notwithstanding the fact that economies of scale apply to most payment instruments;

− cost levels and structures related to payments vary significantly in the different sectors, moreover the card, cash and giro payment instrument covers several types of services;

− it is not clear what advantage society gains − beyond savings − from the change of payment instruments.

Private costs, paid and received fees and − after adjusting the private costs by paid and received fees − own production costs and net private costs were determined in each sector (for participants of the payment chain), for each payment instrument.

The bank survey covered 35 payment services; participants were requested to estimate direct and indirect costs relating

80 _{Gresvik and Haare (2009a).}

81 _{Payment orders primarily serving the settlement of public utility, telecommunications and other bills, most of which are currently transacted} electronically.