Commercial banks in the Netherlands are urging a rapid switch to electronic payments after a study by McKinsey found that the nation's top banks booked a net loss of EUR23 million on payments transactions in 2005.
The study - which examined the books of ABN Amro, ING, Fortis, SNS Reaal and Rabobank - found that gross profits of EUR3.996 billion on all payment instruments were more than offset by EUR4.019 billion in costs.
While the business segment generated net revenue of EUR708 million, the retail consumer market accounted for a net loss of EUR642 million. Much of the excess costs related to account maintenance, and the management of cash payments and paper-based credit transfers.
The Dutch central bank and the Dutch Association of Banks, who ordered the study, say the results should spur a discussion between banks, shop owners, regulators and consumers that may eventually lead to a more efficient 'National Platform on Payment Systems'.
Flip Klopper, an executive at the Dutch central bank, says: "We would like to see less cash, less paper, more Internet, more electronic paying."
The introduction of a Single Euro Payments Area (Sepa), while incurring a hefty initial price tag, is ultimately expected to lead to a more streamlined system. In the interim, a co-ordinated push to encourage consumers to switch to Internet and electronic transactions, such as debit cards, will be enforced.
Other measures to push down costs are also being explored. Late last month ABN Amro teamed with Rabobank to establish a 50:50 joint venture firm that will manage both banks' cash processing operations. ABN Amro says the new venture will help keep the long-term costs of cash processing for both banks "under control".