## _wp04122

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### INTRODUCTION — Overview and aim
- Aim:
  - Assess whether internet banking, electronic finance, and e-money challenge institutional arrangements and instruments for financial stability, efficiency, and effectiveness of monetary policy.
  - Dispel extreme predictions (for example, disappearance of money; central banks made redundant; monetary policy made irrelevant) and evaluate likelihood and policy implications.
  - Focus on forces sustaining e-money development and central banks’ ability to conduct monetary policy; regulatory concerns acknowledged but not addressed in depth.
- Framing:
  - E-money defined (ECB, 1998) as an “electronic store of monetary value on a technical device that may be widely used for making payments to undertakings other than the issuer without necessarily involving bank accounts in the transaction, but acting as a prepaid bearer instrument.”

### Key findings on e-money and implications
- E-money as a network good and macro effects:
  - E-money could become an important form of currency and affect effectiveness and implementation of monetary policy.
  - If increased e-money use substantially limits demand for central bank reserves, central banks would need to change operational targets and coordinate monetary and fiscal policies more closely.
  - The optimal size of monetary unions could differ if e-money plays a prominent role.
- Current assessment:
  - Current level of e-money use does not pose a threat to financial system stability.
  - Central banks currently have the means to successfully implement objectives of monetary policy.
- Fiscal policy interaction:
  - Central banks can lose control over monetary policy if the government does not run a responsible fiscal policy.
  - Central banks could respond by introducing additional regulation or by resizing the monetary areas they regulate.

### Empirical trends and statistics (BIS surveys, 2000–2003)
- Growth rates of systems:
  - Network-based systems growth: 100 percent (2001) and 67 percent (2002).
  - Card-based systems growth: 27 percent (2001) and 36 percent (2002).
- Geographic distribution and evolution:
  - In 2003, about 40 percent of e-money systems were located in Western Europe, down from 50 percent in 2001.
  - Asia launched 21 new systems and experienced considerable enlargement in Hong Kong SAR.
  - Africa created eight new systems between 2000 and 2003; none of the previously existing African systems failed in that period.
  - North America: use remains limited due to traditional credit-card usage for small transactions.
  - Central and South America and the Caribbean: many early systems failed; since 2000 all systems in Mexico, Costa Rica, Honduras, and Venezuela were discontinued; a new system was introduced in Brazil in 2002.
- Transaction size:
  - Average purchase value decreased from US$4.7 to US$2.3 between 2000 and 2003, supporting the view that e-money will be mainly used for small-size payments.
- Aggregate BIS regional figures (selected, exact as reported):
  - Number of e-money systems — Total: 49 (2000); 68 (2001); 94 (2003).
  - Cards issued (in thousands) — Western Europe: 140,816.7 (2000); 158,374.0 (2001); 122,005.5 (2003).
  - Float outstanding (in millions of U.S. dollars) — Total: 250.7 (2000); 281.8 (2001); 5,98.2 (2003).
  - Purchase volume and average payment figures reported in Table 3 with noted regional heterogeneity (see Table 3 excerpt for exact numbers).

### Conceptual framing: e-money as a network good
- Main types of e-money:
  - E-cash: reloadable electronic purses and multi-purpose stored value cards (SVC).
  - Network money: funds stored in software products for payments/transfers over communication networks.
  - Access products: allow agents to access bank accounts and transfer funds (new ways of executing transactions with existing money).
- Distinguishing features of e-money schemes:
  - (i) technical implementation requires computer and software expertise;
  - (ii) these products are liabilities on the balance sheet of the issuer;
  - (iii) transferability is limited (consumer-to-merchant straightforward; consumer-to-consumer unusual);
  - (iv) transactions can be easily recorded (no anonymity).
- Comparison with traditional bank notes:
  - Bank notes: infinitely transferable, completely anonymous, settlement risk-free, usable for any transaction as legal tender, maximum benefit from positive network externalities.
  - E-money: not necessarily central bank–settled liabilities; exploits network externalities only to the extent of scheme size, goods/services offered, number of users, and ease of access.
- Network-good dynamics and critical mass:
  - Network externalities increase utility for members as user numbers grow.
  - Market for a network good may not exist unless expected network size exceeds a minimum level.
  - Under perfect competition a critical mass point (n0) exists; marginal costs above c0 imply zero optimal network size; with MC < c0 multiple equilibria can exist but only the outer intersection is a stable Pareto-efficient equilibrium.
  - Private issuance and oligopoly can yield smaller networks unless issuers adopt compatible technology and cooperation is profitable.
- Conditions for sustainable e-money networks (Van Hove, 1999):
  - Increasing economies of scale in production (few large issuers).
  - Strong network effects for consumers.
  - Network effects must not weaken too quickly.
  - Uniform services to reinforce network utility.
  - Installed base must be visible for consumer expectations.
  - Minimum geographical scale to avoid excessive local supply.

### Payments, settlement, and implications for central bank reserves
- Central bank primary liabilities: currency and bank reserves.
- Substitutability and limits:
  - E-cash competes with currency for small transactions but is a partial substitute because e-cash lacks anonymity and bears issuer risk (issuer not risk-free); traditional currency remains settlement risk-free and legal tender.
- Settlement practices and implications:
  - In network-based systems banks typically settle daily net imbalances with central bank balances (net system) or via RTGS; settlement on central bank books sustains positive demand for central bank reserve money.
  - Central bank final settlement advantages: cannot fail; acts as lender of last resort; monopolistic issuer of base money able to supply liquidity.
  - Private settlement systems lack those guarantees, making it unlikely central banks will be supplanted as settlement centers in the foreseeable future.
- Technological effects on reserve demand:
  - IT improvements and real-time settlements can reduce demand for reserve money, making reserve demand highly volatile and possibly approaching zero for settlement purposes.
  - Reduction in reserve demand has profound consequences for central bank implementation and effectiveness of monetary policy.

### Financial development and network “points” (purchasing power created outside financial institutions)
- Definition and characteristics:
  - Network points (for example, frequent-flyer miles, loyalty points) represent purchasing power (PP) created outside financial institutions and recorded as liabilities of issuers.
  - So far limited fungibility and transferability; often time-limited and potentially worthless if issuer bankrupt.
  - Issuers can control “points inflation” by changing prices of goods and services they supply, coordinating supplier and PP functions within a single institution.
- Potential developments and macro effects:
  - If points gain broader transferability across networks, they could become quasi-money with potential exchange rates among network points.
  - Current role of such PP considered limited and not systemic.
  - Could increase sectoral pro-cyclicality and reduce stability of relationships between real activity and monetary aggregates used by central banks.

### Transmission of monetary policy in the presence of e-money
- Resilience of central bank control:
  - Even with currency disappearance, elimination of currency would not by itself eliminate demand for base money; it would merely reduce it.
  - Reserve requirements are only part of central bank reserve demand; settlement balances (if on central bank books) remain a demand source.
  - Central bank control over short-term rates persists as long as settlement takes place on the books of the central bank because varying the interest rate on overnight balances affects the term structure of interest rates and aggregate spending.
- Risks in a cashless society:
  - If central bank cannot create liabilities directly, it may have to borrow them in the market and could lose seigniorage.
  - Central bank independence and effectiveness depend on size of its balance sheet and access to collateral (typically liquid government securities).
  - Central bank market borrowing to enforce an interest-rate band can generate losses if it lends at the enforced rate while borrowing at market rate.
  - Dependence on treasury supply of risk-free securities creates fiscal–monetary interdependence and raises solvency and profitability concerns for the central bank.
- Policy and structural responses proposed or discussed:
  - Asset-based reserve requirements (ABRR) to target undesirable asset allocations and exercise counter-cyclical control; ABRR broaden monetary base definition and target specific assets.
  - Broader regulatory measures to retain monetary control include:
    - (i) reintroducing reserve requirements;
    - (ii) tightly supervising e-money issuers;
    - (iii) limiting types of assets issuers may use to back e-money;
    - (iv) maintaining sources of demand for central bank money (for example, requiring tax payments in central bank money).
  - Regulatory responses may trigger regulatory races between authorities and e-money issuers.
  - Alternative structural response: redefine monetary areas and resize central banks relative to markets they regulate.

### Network externalities and the optimal monetary area (Section III)
- Money generates positive network externalities: utility for any individual increases with number of users.
- Cost structure:
  - High fixed costs and constant marginal costs (MC); economies of scale in the supply of the means of payment are very high.
  - Pareto-optimal network size at point n_e where price equals marginal cost.
- E-money effect on union size:
  - Once e-money reaches critical mass it can replace traditional money in some sectors; new network money that efficiently replaces central bank money in final settlement has lower marginal costs for participants.
  - IT facilitates transactions, increases demand for network money, and can shift MC downward and willingness-to-pay (demand) upward, leading to a greater optimal network size.
- Countervailing IT effects on monetary unions:
  - Diffusion of e-money increases risk of strong currencies replacing weaker ones, increasing incentives to join a monetary union (MC shifts downward).
  - IT increases compatibility of existing monetary systems, reducing incentive to join a full monetary union (willingness-to-pay or P curve shifts downward).
  - Ambiguous equilibria: depending on relative shifts, IT could increase monetary union size (example point n3) or lead to smaller unions with better-integrated networks (example point n2).
  - Costa Storti and De Grauwe (2002) argue downward shift in willingness-to-pay may be second order relative to MC reductions, producing larger unions.
- Policy implications:
  - Central banks’ authority could expand to broader monetary areas formed around e-money networks.
  - E-money diffusion could require substantial adjustments in monetary policy implementation.
  - Loss of seigniorage in an e-money environment requires changes in implementation: target intervention bands, rely on central bank balance-sheet size for credibility.
  - Central banks unable to credibly enforce policy will need to introduce additional regulation, create new institutions, or merge into wider monetary unions.
  - Domestic regulatory measures and international coordination of regulations will be required.

### Conclusions on payment/settlement innovations and purchasing power outside the financial system
- Innovations increase transaction speed and potentially efficiency in use of liquid resources.
- These innovations are unlikely to deprive central banks of ability to determine short-term interest rates and steer monetary policy and influence real variables.
- Disappearance of central bank notes is possible but judged highly unlikely; central bank role in payment and settlement is not seriously challenged by present innovations.
- Purchasing power (PP) outside the monetary system (for example, airline points) is currently limited in threat to central bank control because points lack fungibility and transferability except in a limited sense, are often time limited, and issuer bankruptcy can render them worthless; PP could have a positive but limited effect on aggregate demand and increase sectoral pro-cyclicality.

### Selected system design and usage datapoints (exact figures drawn from Tables 1–3 excerpts)
- Selected system design / value limits (exact entries as reported):
  - Switzerland — CASH, Card-based: "204 per card (680 per day)"; "193 per card"; e-cashTM: "n.a."; "3,401 per month".
  - United Kingdom — Mondex Network/Card: "165 (GBP 100, i.e., unchanged, but in USD)".
  - United Kingdom — Visa Cash: "83 (GBP 50, i.e., unchanged, but in USD)".
  - United States — Buxx (Visa reloadable) Network-based: "1,500.00".
  - United States — Non-payroll (Mastercard reloadable) Network-based (2003): "500–5,000".
  - United States — Travel (American Express reloadable) Network-based (2003): "2,750".
  - United States — Gift cards (Visa non-reloadable) Network-based (2003): "10–1,000".
  - Hong Kong — Octopus Card-based: "129.00" and "Approx. 130".
  - India — State Bank of India Prepaid foreign travel card (2003): "10,000"; Oriental Bank of Commerce Prepaid (2003): "20,000"; ICICI Bank Prepaid: "15,000 for non-travel cards and 50,000 for travel cards"; IDBI Bank Prepaid multiutility gift card: "25,000".
  - Korea — K-Cash / Mybi / A-Cash / Mondex common entry: "429".
  - Malaysia — MEPS Cash Card-based: "131.58" (2001) and "2.000" (2003).
  - Singapore — CashCard Card-based: "289" (2001) and "287.94" (2003).
  - Venezuela — Mondex ePurse card: "200.00".
- Selected usage / float and transaction figures (exact entries as reported):
  - Austria — Quick: Cards issued: "48,000,000" (1999), "55,000,000" (2000), "56,000,000" (2001); Average transaction values: "6.00" (1999), "4.17" (2000), "4.95" (2001), "7.70" (2002); Float outstanding: "3.30" (1999), "3.90" (2000), "4.30" (2001), "14.11" (2002).
  - Belgium — Proton: Cards issued: "7,000,000" (1999), "8,500,000" (2001); Volume of daily transactions: "149,261" (1999), "156,357" (2001), "300,445" (2002); Float outstanding: "44.40" (1999), "43.43" (2001), "129.00" (2002).
  - Germany — GeldKarte: Cards issued: "60,000,000" (1999), "60,000,000" (2001), "62,000,000" (2002); Average transaction values: "3.60" (1999), "2.21" (2001), "1.95" (2002); Float outstanding: "70.80" (1999); "58.00" (2001); "75.00" (2002).
  - Spain — Virtual C@sh+: Cards issued or home PC used: "5,690,036" (1999), "8,802,825" (2000); Float outstanding: "10.63"; "27.34".
  - Hong Kong — Octopus: Cards issued: "5,600,000"; "7,000,000"; "9,000,000"; Average transaction values: "0.94"; "0.89"; "1.00".
  - Singapore — CashCard: Cards issued: "3,156,637"; "4,696,861"; "6,000,000"; Average transaction values: "0.62"; "0.75"; "1.19"; Float outstanding: "15.46"; "19.63"; "26.30".
  - Selected domestic/system aggregate changes (Table 4) — percentage changes:
    - Total e-money systems growth: 38.8 (2001); 38.2 (2003).
    - Total float outstanding change: 12.4 (2001); 112.3 (2003).
    - Total purchase volume change: 51.3 (2001); 72.8 (2003).
    - Total average payment change: -20.4 (2001); -37.4 (2003).

*Source: _wp04122 - References, https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2004/_wp04122.pdf*

### References..............................................................................................................

### _wp04122 - References..............................................................................................................

### Tables
- 1.     System Design Features ...................................................................................................23
- 2.     Data on Use of E-Money .................................................................................................33
- 3.     Characteristics and Utilization of E-Money Products, 2000–2003 .................................38
- 4.     Changes in Characteristics and Utilization of E-Money Products, 2000–2003...............39

### Figures
- 1.     Electronic Money Schemes................................................................................................5
- 2.     The Fulfilled Expectation Demand Curve .........................................................................8
- 3.     The Market for Overnight Balances in a Cashless Society..............................................16
- 4.     Optimal Size of Networks................................................................................................19
- 5.     The Effect of Information Technology on the Optimal Size of Monetary Unions..........21

### Page marker
- - 3 -

*Source: _wp04122 - References, https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2004/_wp04122.pdf*

### INTRODUCTION

### INTRODUCTION

### Overview and aim
- The paper assesses whether recent technological innovations in financial transactions (internet banking, electronic finance, e-money) challenge current institutional arrangements and the availability of instruments to guarantee financial stability, efficiency, and effectiveness of monetary policy.
- Aim: to dispel extreme predictions (e.g., disappearance of money, central banks made redundant, monetary policy made irrelevant) and evaluate how likely such outcomes are and whether existing arrangements and policy instruments remain viable.
- Regulatory concerns raised by internet banking, e-finance, and e-money are acknowledged but not addressed here; focus is on forces sustaining e-money development and central banks’ ability to conduct monetary policy in the presence of e-money.

### Key findings on e-money and its implications
- E-money as a network good:
  - E-money could become an important form of currency in the future, affecting effectiveness and implementation of monetary policy.
  - If increased e-money use substantially limits demand for central bank reserves, central banks would need to change operational targets and coordinate monetary and fiscal policies more closely.
  - The optimal size of monetary unions could differ if e-money plays a prominent role.
- Current assessment:
  - The current level of e-money use does not pose a threat to financial system stability.
  - Central banks currently have the means to successfully implement the objectives of monetary policy.
- Fiscal policy interaction:
  - Central banks can lose control over monetary policy if the government does not run a responsible fiscal policy.
  - Central banks could respond by introducing additional regulation or by resizing the monetary areas they regulate.

### Empirical trends and statistics from BIS surveys (2000–2003)
- Growth rates of systems (2001 and 2002):
  - Network-based systems growth: 100 percent (2001) and 67 percent (2002).
  - Card-based systems growth: 27 percent (2001) and 36 percent (2002).
- Geographic distribution and evolution:
  - In 2003, about 40 percent of e-money systems were located in Western Europe, down from 50 percent in 2001.
  - Asia launched 21 new systems (India, South Korea, Malaysia, the Philippines, and Singapore) and experienced considerable enlargement in Hong Kong SAR.
  - Africa created eight new systems between 2000 and 2003; none of the previously existing African systems failed in that period.
  - North America: use remains limited due to traditional credit-card usage for small transactions.
  - Central and South America and the Caribbean: many early systems failed; since 2000 all systems in Mexico, Costa Rica, Honduras, and Venezuela were discontinued; a new system was introduced in Brazil in 2002.
- Market structure and usage:
  - Western Europe: most mature market, lowest turnover rate, largest volume of purchases; number of cards issued is decreasing while purchase volume is increasing at a very high pace; systems existing since 2001 have reduced the number of cards issued but account for about 95 percent of total purchases.
  - Asia: number of e-cards issued increasing faster than purchase volume; many new systems recently launched.
- Transaction size:
  - From 2000 to 2003, average purchase value decreased from US$4.7 to US$2.3, supporting the view that e-money will be mainly used for small-size payments.

### Conceptual framing: e-money as a network good
- Definition referenced: e-money defined as an “electronic store of monetary value on a technical device that may be widely used for making payments to undertakings other than the issuer without necessarily involving bank accounts in the transaction, but acting as a prepaid bearer instrument” (ECB, 1998).
- Main types of e-money: e-cash, network money, and access products.
  - E-cash: reloadable electronic purses and multi-purpose stored value cards (SVC).
  - Network money: funds stored in software products for payments/transfers over communication networks.
  - Access products: allow agents to access bank accounts and transfer funds (new ways of executing transactions with existing money).
- Distinguishing features of e-money schemes:
  - (i) technical implementation requires computer and software expertise;
  - (ii) these products are liabilities on the balance sheet of the issuer;
  - (iii) transferability is limited (consumer-to-merchant straightforward; consumer-to-consumer unusual);
  - (iv) transactions can be easily recorded (no anonymity).
- Comparison with traditional bank notes:
  - Bank notes: infinitely transferable, completely anonymous, settlement risk-free, usable for any transaction as legal tender, maximum benefit from positive network externalities.
  - E-money: not necessarily central bank–settled liabilities; exploits network externalities only to the extent of scheme size, goods/services offered, number of users, and ease of access.
- Network-good dynamics:
  - Network externalities increase utility for members as the number of users grows.
  - Concept of critical mass: a market for a network good will not exist unless expected network size exceeds a minimum level.
  - Under perfect competition, a critical mass point (n0) exists; marginal costs above c0 imply zero optimal network size; with MC < c0 multiple equilibria can exist but only the outer intersection is a stable Pareto-efficient equilibrium.
  - Private issuers and oligopoly: single private issuer may lead to smaller networks than perfect competition; social optimum in oligopoly possible if issuers adopt compatible technology and cooperation is profitable.
- Conditions for sustainable e-money networks (Van Hove, 1999):
  - Increasing economies of scale in production (few large issuers).
  - Strong network effects for consumers.
  - Network effects must not weaken too quickly.
  - Uniform services to reinforce network utility.
  - Installed base must be visible for consumer expectations.
  - Minimum geographical scale to avoid excessive local supply.

### Payments, settlement, and implications for central bank reserves
- Central bank primary liabilities: currency and bank reserves.
- E-cash (e-purses, SVCs) competes with currency for small transactions but is a partial substitute because:
  - E-cash: for very small payments, lacks anonymity, bears issuer risk (issuer not risk-free).
  - Traditional currency: broader range of services, legal tender, settlement risk-free.
- Network money and settlement:
  - In network-based systems, transactions are recorded and can be settled within the issuer’s system.
  - Banks typically settle daily net imbalances with central bank balances (net system) or via RTGS; settlement on central bank books gives positive demand for central bank reserve money.
  - Central bank advantages as final settlement agent:
    - Cannot fail.
    - Acts as lender of last resort.
    - Monopolistic issuer of base money, able to supply liquidity as needed.
  - Private settlement systems lack those guarantees and cannot play lender-of-last-resort roles, making it unlikely central banks will be supplanted as settlement system centers in the foreseeable future.
- Technological effects on reserve demand:
  - IT improvements and real-time settlements can reduce demand for reserve money, making reserve demand highly volatile and possibly approaching zero for settlement purposes.
  - Reduction in reserve demand has profound consequences for central bank implementation and effectiveness of monetary policy.

### Financial development and network “points”
- Network points (e.g., frequent-flyer miles, loyalty points) represent purchasing power (PP) created outside financial institutions and recorded as liabilities of issuers.
- Characteristics and risks:
  - So far limited fungibility and transferability; often time-limited and potentially worthless if issuer bankrupt.
  - Issuers can control “points inflation” by changing prices of G&S they supply, coordinating supplier and PP functions within a single institution.
  - If points gain broader transferability across networks, they could become quasi-money, with potential for exchange rates among network points.
- Macro effects:
  - Current role of such PP considered limited and not systemic.
  - Could increase sectoral pro-cyclicality and reduce stability of relationships between real activity and monetary aggregates used by central banks.

### Transmission of monetary policy in the presence of e-money
- Even in extreme case of currency disappearance, elimination of currency would not by itself eliminate demand for base money; it would merely reduce it.
- Reserve requirements are only part of central bank reserve demand; settlement balances (if settled on central bank books) remain a demand source.
- Central bank control over short-term rates persists as long as settlement takes place on the books of the central bank because:
  - Varying the interest rate on overnight balances affects the term structure of interest rates and aggregate spending.
  - Reduction and increased instability in demand for base money raise uncertainty and risk premia in interest rates.
- Cashless society risks:
  - If central bank cannot create liabilities directly, it must borrow them in the market and could lose seigniorage.
  - Central bank independence and effectiveness depend on size of its balance sheet and access to collateral (typically liquid government securities).
  - Central bank borrowing in the market to enforce an interest-rate band can generate losses if it lends at the enforced rate while borrowing at market rate (diagrammatic example shows excess demand and arbitrage).
  - Dependence on treasury supply of risk-free securities creates fiscal–monetary interdependence and raises solvency and profitability concerns for the central bank.
- Possible policy and structural responses:
  - Asset-based reserve requirements (ABRR) proposed to allow central bank to target undesirable asset allocations and exercise counter-cyclical control; ABRR broaden monetary base definition and target specific assets.
  - Broader regulation measures to retain monetary control include:
    - (i) reintroducing reserve requirements;
    - (ii) tightly supervising e-money issuers;
    - (iii) limiting types of assets issuers may use to back e-money;
    - (iv) maintaining sources of demand for central bank money (e.g., requiring tax payments in central bank money).
  - Regulatory responses may trigger regulatory races between authorities and e-money issuers.
  - Alternatively, IT might motivate a redefinition of monetary areas and resizing of central banks relative to markets they regulate.

### Implications for monetary areas and policy coordination
- E-money modifies optimal size of monetary unions because money’s network-good properties alter monetary space and functions.
- Presence of outside money (money competing with legal tender) weakens central bank control over monetary aggregates and the real economy.
- Policy implications:
  - E-money will not fully replace central bank money but likely create new or sub-monetary spaces.
  - Central banks and regulators may need to make e-money legal tender and supervise issuers to address compatibility problems, or monetary areas may be reshaped (wider or different configurations) to reflect new networks.
  - Effective monetary policy in a world with significant e-money requires well-coordinated fiscal and monetary policies, appropriate regulation of issuers and backing assets, and possibly new operational instruments.

*Source: INTRODUCTION section of the provided IMF working paper content unit _wp04122 - INTRODUCTION.*

### Section III. Money generates network externalities because the utility of money for any

### _wp04122 - Section III. Money generates network externalities because the utility of money for any

### Network externalities and the optimal monetary area
- Money generates positive network externalities: the utility of money for any individual increases with the number of users.
- The cost structure of a monetary network is characterized by high fixed costs and constant marginal costs (MC); economies of scale in the supply of the means of payment are very high (AC curve in Figure 4).
- The Pareto-optimal size of the network is obtained at point n_e where price equals marginal cost.
- Once e-money reaches a critical-mass point it can replace traditional money in some sectors of the monetary system:
  - If banks and financial institutions create a new network money that efficiently replaces central bank money in final settlement, this new form of money will have lower marginal costs for network participants.
  - IT facilitates transactions among network participants and provides better connections to other networks, increasing demand for network money (the price consumers are willing to pay to join the network).
  - In Figure 4, lower marginal costs and higher prices correspond to a downward shift of the MC curve accompanied by an upward shift of the demand schedule, leading to a greater optimal size of the network.
- E-money could contribute to creation of larger currency areas that bypass traditional payment systems based on central bank money; new networks overcome national boundaries and require coordination among country authorities to manage monetary developments of new areas.

### Effects of e-money and information technology (IT) on monetary unions
- Two countervailing effects of e-money and IT on monetary unions:
  - Diffusion of e-money increases risk of strong currencies replacing weaker ones and creating a world hierarchy of monies, increasing incentives to join a monetary union; this tends to shift the MC schedule downward and increase the optimal size of a monetary union.
  - IT increases compatibility of existing monetary systems, raising accessibility of different networks and reducing the incentive to join a full monetary union; this shifts the willingness-to-pay (P) curve downward.
- Ambiguous equilibrium outcomes (Figure 5):
  - Increased compatibility is represented by a shift of the P schedule to P'.
  - The marginal cost (MC) countries face in joining a monetary union increases with the number of participants because larger unions reduce each member’s influence on union-wide monetary policy; the intercept of MC with the vertical axis represents the marginal cost for an individual country.
  - The possibility that outside money reduces power of national authorities (via larger capital movements) decreases the cost of joining a monetary union and is represented by a downward shift of MC to MC'.
  - Depending on the relative magnitude of these shifts, IT could lead to:
    - An increase in the size of the monetary union (point n3), or
    - A smaller monetary union with better-integrated different networks (point n2).
  - Costa Storti and De Grauwe (2002) argue that a downward shift in the willingness-to-pay curve could be second order relative to downward movements of the MC curve, leading to an increase in the optimal size of a monetary union.
- Compatibility increases the benefit of agents joining compatible monetary networks and sustains diffusion of e-money regionally while improving efficiency of existing national payment systems.
- Note on possible developments: issues include the currency of denomination of e-money and possible e-money exchange rates if a reference currency has not been identified within the currency union.

### Implications for central banks, monetary policy, and regulation
- Central bank authority could be expanded to cover broader monetary areas if new monetary regions form around e-money networks.
- E-money diffusion could require substantial adjustments in monetary policy implementation; when e-money diffusion is significant, arguments for single-country analysis (as in Section VI) may apply, but the paper judges this case "highly unlikely even in the long run."
- Loss of seigniorage in an e-money environment requires changes in monetary policy implementation:
  - Instead of operating from liquidity-based open market operations, central banks would alter monetary policy by targeting an intervention band to signal policy intentions directly to the market.
  - The size of the central bank balance sheet would matter for the credibility of central bank policy.
- Central banks that cannot credibly enforce monetary policy decisions will be forced to reform by:
  - Introducing additional regulation of e-money issuers, or
  - Creating new institutions better suited to characteristics of evolving monetary systems, or
  - Merging existing monetary systems into wider monetary unions.
- Regulatory challenge: if central banks can reassert their role in the new environment, a serious regulatory challenge remains; domestic regulatory measures and international coordination of regulations will be required.

### Conclusions on payment and settlement innovations and on "purchasing power" outside the financial system
- Main conclusions:
  - Innovations in payment and settlement technology increase the speed of financial transactions and possibly the efficiency in the use of liquid resources.
  - These innovations are unlikely to deprive central banks of their ability to determine short-term interest rates and to steer monetary policy and influence real economic variables.
  - Disappearance of central bank notes is possible but highly unlikely; the central bank role in payment and settlement is not seriously challenged by present innovations.
- On purchasing power (PP) created outside the monetary system (e.g., airline points):
  - The paper explores whether PP outside financial institutions threatens central bank control of the money supply.
  - Short answer: negative, because PP is limited—points lack fungibility and transferability except in an extremely limited sense, are often time limited, and issuer bankruptcy can render them worthless.
  - PP might have a positive but limited effect on aggregate demand and could make sectoral demand more pro-cyclical.

*Source: _wp04122 - Section III. Money generates network externalities because the utility of money for any (extract).*

### 150.00              n.a.               -              No              No              -              No              No 

### Content unit: _wp04122 - 150.00              n.a.               -              No              No              -              No              No

### System design features — selected entries and exact data points (from Table 1)
- Switzerland — CASH, Card-based:
  - "204 per card (680 per day)"
  - "193 per card"
  - e-cashTM: "n.a." value limit; "3,401 per month"
- United Kingdom — Mondex Network/Card:
  - "165 (GBP 100, i.e., unchanged, but in USD)"
  - System shows planned later multifunction and ID/access control: "ID and access control. No other payment function at present, but planned later"
- United Kingdom — Visa Cash:
  - "83 (GBP 50, i.e., unchanged, but in USD)"
  - Payment functions listed: "Debit/credit/check guarantee/ ATM card"
- United Kingdom — Magex Wallet Network-based:
  - Value Limit: "n.a." (2000, 2001)
  - Transferability/Adapted for network payments: "No" (2000, 2001) and later "Yes" (2002)
- Central and Eastern Europe — Lithuania eLitoCard Card-based:
  - Value limits: "No limit" (2000, 2001)
  - Transferability: "No" (2000, 2001)
  - Multicurrency: "LTL, USD, EUR"
  - Multifunctional: "Yes" (debit card, identity card)
- Moldova — MoldCard system Card-based:
  - Value limit: "2,413.00" (2000 and 2001)
  - Transferability: "-"; Multifunctional: "Yes"
- Russia — PayCash Network-based:
  - Value limits: "No limit" (2000, 2001)
  - Transferability: "-" ; Adapted for network payments: "Yes" (2001)
- Slovakia — MicroPay1 / mKonto1 Network-based:
  - Value limit: "Small values"
  - Transferability: "-" ; Adapted for network payments: "Yes"
- Turkey — Kampüs Karti (Campus Card) Card-based:
  - Value limit: "n.a." (2000, 2001)
  - Multifunctional: "Yes Debit card functionality"
- Canada — Visa Cash Card-based:
  - Value limit: "335.00" (2000, 2001)
  - Multifunctional: "Yes" (2000, 2001)
- Canada — Mondex (Sherbrooke, Quebec) Card-based:
  - Value limit: "335.00 (average)"
  - Transferability/Adapted for network payments: "Yes" (2000, 2001)
- United States — Buxx (Visa reloadable) Network-based:
  - Value limit: "1,500.00" (2000, 2001)
  - Adapted for network payments: "Yes" (2000, 2001)
  - Multifunctional/payment access listed: "ATM" (2000, 2001)
- United States — Non-payroll (Mastercard reloadable) Network-based:
  - Value limit (2003): "500–5,000"
- United States — Travel (American Express reloadable) Network-based:
  - Value limit (2003): "2,750"
- United States — Gift cards (Visa non-reloadable) Network-based:
  - Value limit (2003): "10–1,000"
- Central, South America and the Caribbean — Brazil Visa Cash Card-based:
  - Value limits: "45–136"
  - Consideration status: "Considered" for Adapted for Network Payments (2000, 2001)
- Honduras — FUTURA Card-based:
  - Value limit shown: "3000" and "3.00" (table entries)
  - Transferability: "Between banking institutions only"
  - Multicurrency: "Yes, Central American currencies and USD"
- Venezuela — Mondex ePurse card:
  - Value limit: "200.00"
  - Transferability: "Yes. Currently restricted among merchants"
  - Multicurrency: "Up to 5 currencies. Currently restricted to local currency"
  - Multifunctional: "Yes (ID card, debit/credit cards)"
- Hong Kong — Octopus Card-based:
  - Value limit: "129.00" and "Approx. 130"
  - Transferability: "No"
- Hong Kong — Mondex Card-based:
  - Value limit: "385.00"
  - Transferability: "Yes" (2000, 2001)
- India — multiple bank prepaid cards (State Bank of India, Oriental Bank of Commerce, ICICI Bank, HDFC Bank, UTI Bank, IDBI Bank, Citibank):
  - Examples of value limits and denominations:
    - State Bank of India Prepaid foreign travel card (2001/2003): "10,000" (listed under 2003)
    - Oriental Bank of Commerce Prepaid: "20,000" (2003)
    - ICICI Bank Prepaid: "15,000 for non-travel cards and 50,000 for travel cards"
    - IDBI Bank Prepaid multiutility gift card: "25,000"
  - Denominations: "USD and EUR", "INR-denominated", "USD" appear in respective rows
  - Use: "Used at ATMs and merchant establishments" appears repeatedly
- Korea — K-Cash / Mybi / A-Cash / Mondex (card-based and network-based):
  - Value limit common entry: "429"
  - Multicurrency / multifunctional entries: "Considered" for multicurrency; multifunctional: "ID card, saving public authentication file, credit card, debit card, etc."
- Malaysia — MEPS Cash Card-based:
  - Value limit: "131.58" (2001) and "2.000" (2003)
  - Multifunctional: "Yes" (2000)
- Singapore — CashCard Card-based:
  - Value limit: "289" (2001) and "287.94" (2003)
  - Multifunctional: "Yes" (2000, 2001)
- Taiwan, China — FISC-IC Card Card-based:
  - Value limit: "15.2 lower limit 303 upper limit 15-295"
  - Multifunctional: "Yes (ATM, debit and phone cards)" and "Yes (ATM, credit, debit, phone card)"
- Taiwan, China — Mondex Taiwan Card-Based:
  - Value limit: "63 per card 1,563 per month Upper limit 295"
  - Multicurrency: "Yes (up to 5 currencies can be stored)"
  - Multifunctional: "Yes. Credit card. Yes (credit card and debit card)"
- Thailand — SCB Smart Card Card-based:
  - Value limits: "250" (2000) and "465" (2001)
  - System types: "2 types: e-purse; ATM/e-purse"
- Africa — selected entries:
  - Ghana — Sika Card-based: Value limit: "-"
  - Nigeria — Valucard / Smartpay / Esca / Paycard / MasterCard local and international:
    - Esca: "Up to NGN 16m" (2001) and "Up to 16m1" (2003)
    - Paycard: "Up to 16ml"
    - MasterCard (local version): "Not indicated"
    - MasterCard (international version): "Not indicated"
  - Tanzania — Tembo Card-based:
    - Value limit (2001): "5,000 for non-account holders 10,000 for account holders"

### Data on use of e-money — selected metrics and exact figures (from Table 2)
- Austria — Quick:
  - Number of cards issued: "48,000,000" (1999), "55,000,000" (2000), "56,000,000" (2001)
  - Volume of daily (purchase) transactions: "6,000,000" (2002)
  - Average value of (purchase) transactions: "6.00" (1999), "4.17" (2000), "4.95" (2001), "7.70" (2002)
  - Float outstanding (in millions of U.S. dollars): "3.30" (1999), "3.90" (2000), "4.30" (2001), "14.11" (2002)
- Austria — Paysafecard:
  - Volume of daily transactions (2002): "40,000"
  - Float outstanding (2002): "1.05"
  - Launch product date: "1995"
- Belgium — Proton:
  - Number of cards issued: "7,000,000" (1999), "8,500,000" (2001)
  - Volume of daily transactions: "149,261" (1999), "156,357" (2001), "300,445" (2002)
  - Average value of transactions: "4.00" (1999), "3.17" (2001), "5.90" (2002)
  - Float outstanding: "44.40" (1999), "43.43" (2001), "129.00" (2002)
  - Launch product date: "Nov.    00"
- Denmark — Danmønt:
  - Volume of daily transactions (2000): "593,000"; (2002): "896,000"
  - Average value of transactions: "1.10" (1999), "1.16" (2001)
  - Launch product date: "Feb.        95"
- Finland — Avant:
  - Volume of daily transactions (2002): "1,000,000"
  - Average value of transactions (2002): "2.00"
  - Launch product date: "1994"
- France — Monéo:
  - Number of cards issued: "15,000" (1999), "60,000" (2001)
  - Volume of daily transactions: "266" (1999), "4,000" (2001), "53,700" (2002)
  - Average value: "1.20" (1999), "3.00" (2001), "3.70" (2002)
  - Float outstanding (2002): "21.01"
- Germany — GeldKarte:
  - Number of cards issued: "60,000,000" (1999), "60,000,000" (2001), "62,000,000" (2002)
  - Volume of daily transactions: "58,000" (1999), "75,000" (2001), "107,547" (2002)
  - Average value of transactions: "3.60" (1999), "2.21" (2001), "1.95" (2002)
  - Float outstanding (1999): "70.80"; (2001): "58.00"; (2002): "75.00"
  - Launch product date: "Jul.   01"
- Italy — MINIpay:
  - Number of cards issued: "442,000" (1999), "40,712" (2000)
  - Volume of daily transactions (2002): "11,362"
  - Average value of transactions: "6.20" (1999), "1.60" (2000), "2.01" (2002)
  - Float outstanding (1999): "0.77"; (2000): "0.49"; (2002): "0.27"
  - Launch product date: "2002"
- Netherlands — Chipknip:
  - Number of cards issued: "13,000,000" (1999), "14,500,000" (2001), "17,200,00 0" (2002)
  - Volume of daily transactions (2002): "238,356"
  - Average value of transactions: "8.00" (1999), "8.00" (2001)
  - Float outstanding (1999): "28.00"; (2001): "25.90"; (2002): "60.00"
  - Launch product date: "Feb.      99"
- Portugal — PMB (Porta Multibanco):
  - Number of cards issued: "3,433,679" (1999), "3,500,357" (2000), "3,700,545" (2002)
  - Volume of daily transactions: "13,060" (1999), "13,090" (2000)
  - Average value of transactions: "1.30" (1999), "0.86" (2000), "2.36" (2002)
  - Float outstanding (1999): "1.50"; (2000): "0.82"; (2002): "0.18"
- Luxembourg — miniCASH:
  - Volume of daily transactions (2002): "383,720"
  - Average value (2002): "3.06"
  - Float outstanding (2002): "3.57"
  - Launch product date: "Mar.                                    03"
- Spain — Euro:
  - Number of cards issued (2002): "10,150,949"
  - Volume of daily transactions (2002): "3,084"
  - Launch product date: "End-1996"
- Selected Asia entries:
  - Hong Kong — Mondex: Average use entries state availability "Available but not currently used"
  - Singapore — CashCard:
    - Number of cards issued: "289" (2000) and "287.94" (2001)
    - Multifunctional: "Yes" (2000, 2001)
- Taiwan, China — FISC-Ebank Network-Based:
  - Value limit (2001): "60,600 upper limit 90,900 (per day)"
- Taiwan, China — Mondex Taiwan Card-Based:
  - Number of cards issued: "63 per card 1,563 per  month"
  - Average transaction value entries and multicurrency: "Yes (up to 5 currencies can be stored)"

*Source: Bank for International Settlements (2000, 2001a, and 2004).*

### 2.35         n.a.

### _wp04122 - 2.35         n.a.

### Data on Use of E-Money (selected entries and figures)
- Spain — Virtual C@sh+:
  - Number of Cards Issued or Home PC Used: 5,690,036 (1999), 8,802,825 (2000)
  - Number of Cards Issued or Home PC Used (other): 6,112; 5,545
  - Average Value of (purchase) Transactions: 3.12; 2.07
  - Float Outstanding (in millions of U.S. dollars): 10.63; 27.34
  - Launch/Product Date: Mid-2000
- Sweden:
  - Number of Cards Issued or Home PC Used: 3,000,000; 4,200,000
  - Volume of Daily (purchase) Transactions: 16,700
  - Average Value of (purchase) Transactions: 7.00; 4.20
  - Float Outstanding (in millions of U.S. dollars): 40.00
  - Launch/Product Date: Mid-2000
- Switzerland — CASH:
  - Number of Cards Issued or Home PC Used: 3,000,000; 3,600,000; 3,692,000
  - Volume of Daily (purchase) Transactions: 54,795
  - Average Value of (purchase) Transactions: 2.22
- United Kingdom — Visa Cash (entry):
  - Number of Cards Issued or Home PC Used: 140,000; 1,60,000
  - Volume of Daily (purchase) Transactions: 507; 507
  - Average Value of (purchase) Transactions: 16.34; 16.34
  - Float Outstanding (in millions of U.S. dollars): 0.26; 0.26
  - Launch/Product Date: Jul. 1995
- Lithuania — eLitoCard:
  - Number of Cards Issued or Home PC Used: 53,000; 105,000; 143,000
  - Volume of Daily (purchase) Transactions: 937
  - Average Value of (purchase) Transactions: 23.40; 6.51; 9.40; 3.60.
  - Float Outstanding (in millions of U.S. dollars): 12.45; 27.00
  - Launch/Product Date: Feb. 98
- Russia — PayCash:
  - Volume of Daily (purchase) Transactions: 47
  - Average Value of (purchase) Transactions: 30.33
  - Float Outstanding (in millions of U.S. dollars): 2.04
  - Launch/Product Date: 1998
- Turkey — Kampüs Karti (Campus Card):
  - Number of Cards Issued or Home PC Used: 3,359; 950; 50,000
  - Volume of Daily (purchase) Transactions: 3; 30
  - Average Value of (purchase) Transactions: 102.90; 3.00
- Canada — Visa Cash:
  - Number of Cards Issued or Home PC Used: 48,000; 61,503; 77,358
  - Average Value of (purchase) Transactions: 2.85; 1.68; 1.50
  - Float Outstanding (in millions of U.S. dollars): 0.03; 0.03; 0.01
- Canada — Mondex (Sherbrooke, Quebec):
  - Number of Cards Issued or Home PC Used: 30,000; 25,108
  - Average Value of (purchase) Transactions: 4.00; 4.42
  - Float Outstanding (in millions of U.S. dollars): 0.09; 0.11
  - Launch/Product Date: Oct. 97
- United States — Mondex (New York):
  - Number of Cards Issued or Home PC Used: 96,000; 96,000
  - Launch/Product Date: Oct. 97
- Brazil — Visa Cash:
  - Number of Cards Issued or Home PC Used: 95,000; 95,000; 50,000
  - Volume of Daily (purchase) Transactions: 334; 334
  - Average Value of (purchase) Transactions: 7,233; 4.42; 3.77; 6.02
  - Float Outstanding (in millions of U.S. dollars): 67.80; 37.70
- Venezuela — Mondex:
  - Number of Cards Issued or Home PC Used: 250
  - Float Outstanding (in millions of U.S. dollars): 3,500.00
  - Launch/Product Date: Jan. 2001
- Hong Kong — Octopus:
  - Number of Cards Issued or Home PC Used: 5,600,000; 7,000,000; 9,000,000
  - Volume of Daily (purchase) Transactions: 390,0000; 6,000,00; 7,000,000
  - Average Value of (purchase) Transactions: 0.94; 0.89; 1.00
  - Launch/Product Date: (confidential)
- Hong Kong — Mondex:
  - Number of Cards Issued or Home PC Used: 200,000; 243,000
  - Average Value of (purchase) Transactions: 4.00; 4.00
  - Launch/Product Date: 2002 Q4
- India — State Bank of India (bank) launch: Aug. 96 (entries listed as "-" or "n.a.")
- Korea — K-Cash, MYbi, A-Cash, Mondex, Visa Cash, Nemo:
  - K-Cash Number of Cards Issued or Home PC Used: 554,260; Volume of Daily (purchase) Transactions: 12,858; Average Payment: 0.59; 0.49
  - MYbi Number of Cards Issued or Home PC Used: 2,057,500; Volume: 501,020; Average Payment: 0.62; 3.72; Launch/Product Date: Jul. 00
  - A-Cash Number of Cards Issued or Home PC Used: 400,000; Volume: 80,000; Average Payment: 0.59; 0.34; Launch/Product Date: Sep. 02
  - Mondex Number of Cards Issued or Home PC Used (Korea): 700,000; Average Payment: n.a.; 0.08; Launch/Product Date: Jun. 01
  - Visa Cash (Korea) Number of Cards Issued or Home PC Used: 860,000; Average Payment: n.a.; 0.02; Launch/Product Date: Jun. 00
  - Nemo Number of Cards Issued or Home PC Used: 3,000,000; Launch/Product Date: Oct. 01
- Malaysia — MEPS Cash and Touch ’n Go:
  - MEPS Cash: Number of Cards Issued or Home PC Used: 53,534; 9,200,000; Volume: 8; 42; Average Payment: 1.81; 1.12; Float Outstanding: 0.06; 0.45; Launch/Product Date: Nov. 01
  - Touch ’n Go: Number of Cards Issued or Home PC Used: 2,400,000; Volume: 80,615; Average Payment: 3.24; 12.29; Launch/Product Date: 1996
- Singapore — CashCard and ez-link:
  - CashCard Number of Cards Issued or Home PC Used: 3,156,637; 4,696,861; 6,000,000
  - Volume of Daily (purchase) Transactions: 276,133; 36,4198; 317,808
  - Average Value of (purchase) Transactions: 0.62; 0.75; 1.19
  - Float Outstanding (in millions of U.S. dollars): 15.46; 19.63; 26.30
  - Launch/Product Date: Dec. 02
  - ez-link card Number of Cards Issued or Home PC Used: 4,000,000; Float Outstanding: 29.77; Launch/Product Date: Nov. 96
- Taiwan, China — FISC-IC Card:
  - Number of Cards Issued or Home PC Used: 2,100,000; 2,030,000
  - Volume of Daily (purchase) Transactions: 1,200; 152
  - Average Payment: 2.43; 3.38

### Table 3 — Characteristics and Utilization of E-Money Products, 2000–2003 (regional aggregates and features)
- Number of E-money Systems:
  - Western Europe: 26 (2000), 34 (2001), 37 (2003)
  - Central and Eastern Europe: 3 (2000), 6 (2001), 5 (2003)
  - North America: 7 (2000), 7 (2001), 11 (2003)
  - Central, South America, and the Caribbean: 6 (2000), 8 (2001), 3 (2003)
  - Asia: 7 (2000), 10 (2001), 27 (2003)
  - Africa: 0 (2000), 3 (2001), 11 (2003)
  - Total: 49 (2000), 68 (2001), 94 (2003)
- Transferability Among Users (percent of total supply, 2001 and 2003):
  - Western Europe: 15 (2001); 12 (2003)
  - Central and Eastern Europe: 2 (2001); 5 (2003)
  - North America: 9 (2001); 2 (2003)
  - Central, South America, and the Caribbean: 2 (2001); 6 (2003)
  - Asia: 21 (2001); 3 (2003)
  - Africa: 8 (2001); 3 (2003)
- Adapted for Network Payments (2001 and 2003):
  - Western Europe: 12 (2001); 4 (2003)
  - Central and Eastern Europe: 3 (2001); 2 (2003)
  - North America: 2 (2001); 5 (2003)
  - Central, South America, and the Caribbean: 7 (2001); 4 (2003)
  - Asia: 4 (2001); 0 (2003)
  - Africa: 0 (2001); 0 (2003)
- Multifunctional Payment System (2001 and 2003):
  - Western Europe: 54.1 (2001); 47.1 (2003)
  - Central and Eastern Europe: 20.0 (2001); 16.7 (2003)
  - North America: 90.9 (2001); 42.9 (2003)
  - Central, South America, and the Caribbean: 0.0 (2001); 25.0 (2003)
  - Asia: 37.0 (2001); 40.0 (2003)
  - Africa: 10.0 (2001); 0.0 (2003)
- Cards Issued (in thousands) — selected regional figures (2000, 2001, 2003):
  - Western Europe: 140,816.7 (2000); 158,374.0 (2001); 122,005.5 (2003)
  - Asia: 3,409.6 (2000); 9,774.5 (2001); 41,189.6 (2003)
  - Total cards issued: 144,503.7 (2000); 168,584.2 (2001); 164,729.3 (2003)
- Float Outstanding (in millions of U.S. dollars) — selected:
  - Western Europe: 1,59.7 (2000); 200.9 (2001); 343.2 (2003)
  - Asia: 19.6 (2000); 23.7 (2001); 74.9 (2003)
  - Total float outstanding: 250.7 (2000); 281.8 (2001); 5,98.2 (2003)
- Purchase Volume (in thousands) and Average Payment (in U.S. dollars) — selected:
  - Western Europe purchase volume: 2,33.9 (2000); 4.7 (2001); 3.8 (2003)
  - Asia purchase volume: 4,177.3 (2000); 6.7 (2001); 2.4 (2003)
  - Total purchase volume: 4,412.4 (2000); 4.7 (2001); 3.7 (2003)
  - Total average payment (noting total average excludes Africa): 11,538.2 (2003) 2/

### Table 4 — Changes in Characteristics and Utilization of E-Money Products, 2000–2003 (percentage changes)
- E-money Systems (percentage change with respect to previous reporting period):
  - Western Europe: 30.8 (2001); 8.8 (2003)
  - Central and Eastern Europe: 100.0 (2001); -16.7 (2003)
  - North America: 0.0 (2001); 57.1 (2003)
  - Central, South America, and the Caribbean: 33.3 (2001); -62.5 (2003)
  - Asia: 42.9 (2001); 170.0 (2003)
  - Africa: n.a. (2001); 266.7 (2003)
  - Total: 38.8 (2001); 38.2 (2003)
- System Turnover (in percent):
  - Western Europe: 61.5 (2001); 79.4 (2003)
  - Central and Eastern Europe: 233.3 (2001); 83.3 (2003)
  - North America: 57.1 (2001); 200.0 (2003)
  - Asia: 42.9 (2001); 250.0 (2003)
  - Total: 87.8 (2001); 129.4 (2003)
- Technological Innovations (units introduced between reporting periods):
  - Western Europe: 2 (2001); 2 (2003)
  - Central and Eastern Europe: 0 (2001); 0 (2003)
  - North America: 0 (2001); 0 (2003)
  - Central, South America, and the Caribbean: 0 (2001); 0 (2003)
  - Asia: 0 (2001); 1 (2003)
  - Africa: 0 (2001); 1 (2003)
  - Total: 2 (2001); 4 (2003)
- Card Issued (percentage change):
  - Western Europe: 12.5 (2001); -23.0 (2003)
  - Central and Eastern Europe: 95.0 (2001); 829.1 (2003)
  - North America: -3.9 (2001); -36.1 (2003)
  - Asia: 186.7 (2001); 321.4 (2003)
  - Total: 16.7 (2001); -2.3 (2003)
- Float Outstanding (percentage change):
  - Western Europe: 25.8 (2001); 70.8 (2003)
  - Central and Eastern Europe: 247.0 (2001); 133.4 (2003)
  - Asia: 20.6 (2001); 216.3 (2003)
  - Total: 12.4 (2001); 112.3 (2003)
- Purchase Volume (percentage change):
  - Western Europe: 31.6 (2001); 186.5 (2003)
  - Central and Eastern Europe: 247.4 (2001); 454.6 (2003)
  - Asia: 52.4 (2001); 67.0 (2003)
  - Total: 51.3 (2001); 72.8 (2003)
- Average Payment (percentage change):
  - Western Europe: -18.6 (2001); -32.6 (2003)
  - Central and Eastern Europe: -48.7 (2001); 225.5 (2003)
  - Asia: -64.1 (2001); -52.5 (2003)
  - Total: -20.4 (2001); -37.4 (2003)

*Source: Bank for International Settlement (2000, 2001a, and 2004).*

### References

### References

### E-money and electronic finance
- Arnone, Marco, 2001, “E-Money and the Transmission of Monetary Policy,” paper presented at the Second Monetary Conference, “Electronic Banking: Challenges and Opportunities for Central Banks,” organized by the Central Bank of Philippines, Manila, Feb. 26, 2001.
- Arnone, Marco and Luca Bandiera, 2003, “E-Money: Chances of Success and Consequences for Monetary Policy,” Kiel Institute for World Economics Working Paper No. 401 (Kiel, Germany: Kiel Institute).
- Cohen, Benjamin J., 2001, “Electronic Money: New Day or False Dawn?” Review of International Political Economy, Vol. 8, No. 2, pp. 197–225, Summer.
- Costa Storti, Claudia and Paul De Grauwe, 2002, “Electronic Money and Optimal Size of Monetary Union,” CEPR Discussion Paper Series, No. 3391, May (London: Centre for Economic Policy Research).
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- Friedman, Benjamin M., 1999, “The Future of Monetary Policy: the Central Bank as an Army with only a Signal Corps,” NBER Working Paper No. 7420, (Cambridge, Mass: National Bureau of Economic Research).
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### Bank for International Settlements and central bank reports
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- Mesonnier, Jean-Stéphane, 2001, “Monnaie Électronique et Politique Monétaire,” Bulletin de la Banque de France, No. 91, July.

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- Katz, Michael L. and Carl Shapiro, 1985, “Network Externalities, Competition and Compatibility,” American Economic Review, Vol. 75, No.3, pp. 424–440.
- Shy, Oz and Juha Tarkka, 2002, “The Market for Electronic Cash Cards,” Journal of Money, Credit and Banking, Vol. 34, No. 2, May.
- Van Hove, Leo, 1999, “Electronic Money and the Network Externalities Theory: Lessons for Real Life,” Netnomics, Vol. 1, pp. 137–171.
- Prinz. Aloys, 1999, “Money in the Real and Virtual World: E-money, C-money and the Demand for Cb-money,” Netnomics, Vol. 1, pp. 11–35.
- Shy, Oz and Juha Tarkka, 2002, “The Market for Electronic Cash Cards,” Journal of Money, Credit and Banking, Vol. 34, No. 2, May.
- White, Lawrence. H., 1984, “Competitive Payments Systems and the Unit of Account,” American Economic Review, Vol. 74, No. 4, (September) pp. 699–712.
- Beck, Hanno, 2001, “Banking is Essential, Banks are Not. The Future of Financial Intermediation in the Age of the Internet,” Netnomics, Vol. 3, pp. 7–22.
- Shy, Oz and Juha Tarkka, 2002, “The Market for Electronic Cash Cards,” Journal of Money, Credit and Banking, Vol. 34, No. 2, May.

### Monetary policy, central banking, and theory
- Borio, Claudio E.V., 1997, “Monetary Policy Operating Procedures in Industrial Countries,” BIS Economic Papers No. 47, July (Basel: Bank for International Settlements).
- Bullard, James and Bruce D. Smith, 2000, “The Value of Inside and Outside Money,” Federal Reserve Bank of St. Louis Working Paper Series No. 2000–027B, November.
- Berk, Jonathan M., 2002, “Central Banking and Financial Innovation. A Survey of the Modern Literature,” Banca Nazionale del Lavoro Quarterly Review No. 222, September.
- Goodhart, Charles, 2000 “Can Central Banks Survive the IT Revolution?” International Finance, Vol. 3, No. 2, pp. 189–209.
- Hankel, Timo, Alain Ize, and Arto Kovanen, 1999, “Central Banking without a Central Bank,” IMF Working Paper No. 99/92 (Washington: International Monetary Fund).
- King, Mervyn, 1999, “Challenges for Monetary Policy: New and Old,” Bank of England Quarterly Bulletin, Vol. 39, pp. 397–415, November.
- Marston, David, 1996, “The Use of Reserve Requirements in Monetary Control–– Operational Features and Country Practices,” IMF/Monetary and Financial Systems Department Operational Paper No. 96/1 (Washington: International Monetary Fund).
- Mundell, Robert A., 1961, “A Theory of Optimum Currency Areas,” American Economic Review, Vol. 51, (September) pp. 657–665.
- Palley, Thomas, 2002, “The E-Money Revolution: Challenges and Implications for Monetary Policy,” Journal of Post Keynesian Economics, Vol. 24, No. 2, pp. 217–233.
- Woodford, Michael, 1997, “Doing without Money: Controlling Inflation in a Post-Monetary World,” NBER Working Paper No. 6188, (Cambridge, Mass: National Bureau of Economic Research), September.
- Woodford, Michael, 2000, “Monetary Policy in a World without Money,” International Finance, Vol. 3. No. 2, pp. 229–260.
- Woodford, Michael, 2003, Interest and Prices: Foundations of a Theory of Monetary Policy, (Princeton, NJ: Princeton University Press).

### Other contributions and perspectives
- Bootle, Roger, 2001, “The Future of Electronic Money - Why the Nok Will Not Replace the Dollar,” The Business Economist, Vol. 32, No. 1, pp. 7–15.
- Cohen, Benjamin J., 2001, “Electronic Money: New Day or False Dawn?” Review of International Political Economy, Vol. 8, No. 2, pp. 197–225, Summer.
- Organization for Economic Cooperation and Development, 2002, The Future of Money (Paris).

*Source: _wp04122 - References*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2004/_wp04122.pdf_