Transformation of payment systems: the case of European Union enlargement

Abstract

In this article, we analyse how the accession to an economic and monetary union and the influence of new institutions may shape consumers' payment decisions in newly acceded countries. Our analysis focuses on the 2004 European Union (EU) enlargement process. Results confirm the prediction of theoretical models about the relevance of economic development, institutional environment and payment infrastructure in retail payment system decisions.

Keywords:

• cash
• payments
• European Union enlargement

JEL Classification:

• E42
• E51
• G21
• O52

Acknowledgements

We are grateful to Miquel–Àngel Garcia-López, Alexander Groh and Bořek Vašíček, participants at the European Financial Management Association meetings at Braga, Financial Management Association European conference at Porto and Multinational Finance Society conference in Rome, for helpful comments. Financial support from the Spanish Ministry of Education and Science through grants SEJ2007–60671/ECON, SEJ2007–62500, SEJ2007–67895–C04–02 and ECO2010–16353 and from Generalitat de Catalunya through SGR 2009–0600 and Instituto Valenciano de Investigaciones Económicas is gratefully acknowledged.

Notes

¹ From now on, when we refer to accessing countries we include all of them.

² European Union (EU)-15 are Germany, France, Belgium, Netherlands, Luxemburg, Italy, Great Britain, Ireland, Denmark, Greece, Portugal, Spain, Austria, Finland and Sweden (in membership order). Great Britain, Denmark and Sweden are not part of the EMU.

³ All variables are expressed in logs.

⁴ In the estimation, we take into account when the countries became members and therefore, from that moment in time, they are included in the accepting group.