that the average bank makes a positive profit of approximately 155 million swedish kronor in the provision of payment services. this calls to question the often stated view that a low interest rate is needed to finance a payment operation that is running at a loss. all payment services except for cash distribution generate net revenues for the bank. credit transfers as a whole give a net revenue of about 160 million swedish kronor. however, most net revenue is generated by card payments, in particular from acquiring services for charge and credit card transactions. the average bank has an annual surplus of 460 million swedish kronor in card payments. interestingly, the bank has an almost equally large annual loss from the distribution of cash to the public, of which two - 2 / 3 thirds come from atm services. we can conclude from this that there are cross subsidies between these two segments where card payment transactions finance distribution of cash to the public. conclusions summing up, our results imply that there might be considerable cost savings to be made by the banks through a more transparent and cost - based pricing this is because such a pricing strategy would lead to changes in the pattern of demand. consumers would have economic incentives to shift to those instruments that are less costly to produce. according to our cost estimates, they would use debit cards more and credit cards and cash less and they would increase their use of electronic credit transfers and direct debits at the cost of paper - based credit transfers. a more cost - based price strategy would result in private customers facing transaction fees on paperbased and electronically - initiated credit transfers and in the introduction of transaction fees for cash withdrawals. fees for acquiring services would have to decrease. the fact that swedish banks do not take any fees whatsoever for cash withdrawals, while such fees can be observed in the other nordic countries, may very well be the explanation for our greater use of cash and lesser use of card payments. based on the data on variable costs and volumes, the banking sector could lower their variable costs by around 560 million swedish kronor annually if bank customers replaced charge and credit cards and cash with debit card payments. the shift from paper - based to electronically - initiated credit transfers could result in a further reduction in the banking sector ’ s variable costs of almost 200 million swedish kronor annually. one interesting issue to consider is the reason for this pricing strategy. banks are probably aware of the potential cost - saving effect of implementing more cost - reflecting prices. banks might, however,

it could seriously impair market functioning. but at the same time, it doesn ’ t make sense to simply outlaw the practice, since that limits flexibility in a way that may not always be called for and would likely reduce market liquidity. the tmpg ’ s recommendations were carefully calibrated to set financial incentives that would minimize fails and have been a marked success. the tmpg also plays an important role in helping to “ fill in the cracks ” between the competing regulations that various treasury market participants face. many different institutions and individuals depend on these markets, and the regulatory system reflects that. the government securities act gave the treasury department some rulemaking authority over all government securities brokers and dealers. but the act also required these firms to register with the sec. at the same time, the federal reserve regulates many of the banks that are active in these markets, and the federal reserve bank of new york also plays an essential role, both as fiscal agent for the u. s. government and, by nature of its frequent activity in these markets, in conducting monetary policy operations. and of course, the commodity futures trading commission regulates treasury futures markets. the agencies work well together, but there is real value in having an industry group help to identify issues that cross regulatory boundaries. i ’ ll give two examples. first, in 2016, the tmpg conducted a study of financial benchmarks and uncovered uses of icap ’ s federal funds open rate that had not previously been well understood. 2 as icap decided to stop publishing the rate, the tmpg also helped to guide market participants to an alternative that is aligned with the international organizations of securities commissions principles for financial benchmarks while steering the market away from the london interbank offered rate ( libor ) as a potential alternative — a move that now seems prescient given the subsequent news around the long - run risks to libor. more recently, the tmpg has been busy creating a map of clearing and settlement in treasury markets, work that i am sure all of the regulatory agencies will find to be of great interest. all of this is incredibly valuable. in fact, my only regret about the tmpg is that we didn ’ t think of creating something like it earlier. as regulators, we fully support your work, and will continue to make sure that our own rules support these markets. the financial industry regulatory authority ’ s ( finra ’ s ) new collection of the treasury transactions of its members through its