After the failure of Lehman Brothers last September, government interventions to guarantee bank deposits and liabilities and to support recapitalization prevented additional collapses; they were insufficient to avert a contraction of credit. Financial markets are still struggling to become fully functional again. Risk aversion remains high. Worldwide, in the past two years banks have recorded losses of over $ billion in their balance sheets.
But with regulations bringing down the transaction costs of card payments and the rise of contactless payment options, this gap could narrow. At the same time, we are at risk of measuring underlying cost structures inaccurately if we fail to recognise that transaction costs may simply be becoming less obvious.