So far we’ve looked primarily at cash payments. Now let’s talk about transactions over interbank payment systems such as TARGET, Fedwire, CHAPS and of course SWIFT. Interbank payments are several orders of magnitude larger than cash transactions: the average SWIFT payment is the equivalent of EUR 400,000 while the average Fedwire payment is even larger at USD 1,200,000. Interestingly, however, their size follows the same type of statistical distribution as cash payments, namely the Log-normal distribution. The obvious question is: why? What process would generate this apparently pervasive distribution of payment size? The honest answer is…we don’t know. But I bet you a dollar it would be fun to find out.
Download chapter 10, How big is that payment?, here.