Cost Recovery and Pricing of Payment Services 1833. Cost reduction requires the appropriate pricing of those services. A modern payment system is essential for promoting domestic and international trade and exchange as well as developing financial markets. Payment users will be directed toward the most efficient payment methods when the costs of producing those services are reflected in the prices paid. Resources are being wasted in the United States because consumers see no important difference in transaction prices or bank costs between using a check or using electronic direct debit in paying a bill, even though the social costs of these two instruments are different.
Electronic payments cost only a third to half as much as paper-based payments.
When payment instruments are not appropriately priced, the costs must be covered elsewhere. When prices reflect the full cost of producing the service, users demand the services that use the fewest real resources. Adjust cost recovery percentages to accommodate how much demand conditions associated with start-up differ from those associated with mature operation. But any such underrecovery must be built into future pricing arrangements once the systems are established and traffic volumes are at a level where full cost recovery is practical. Induce efficient use of scarce resources.