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Merchants' Costs of Accepting Means of Payment: Is Cash the Least Costly?

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Abstract

In a competitive sales environment, merchants are compelled to offer consumers the option of paying for goods and services using a variety of payment methods, including cash, debit card, or credit card. Each method entails different costs and benefits to merchants. To better understand the costs of accepting retail payments, the Bank of Canada surveyed over 500 Canadian merchants and found that most consider cash the least costly. This article investigated this perception by calculating the variable costs per transaction of accepting different means of payment. The findings are that costs for each payment method vary by merchant and transaction value, with debit cards the least costly payment for a broad cross-section of merchants.

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File URL: http://www.bankofcanada.ca/wp-content/uploads/2010/06/arango_taylor.pdf
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Bibliographic Info

Article provided by Bank of Canada in its journal Bank of Canada Review.

Volume (Year): 2008-2009 (2008-2009)
Issue (Month): Winter ()
Pages: 17-25

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Handle: RePEc:bca:bcarev:v:2009:y:2009:i:winter08-09:p:17-25

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Web page: http://www.bank-banque-canada.ca/

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Cited by:
  1. Wakamori, Naoki & Welte, Angelika, 2013. "Why Do Shoppers Use Cash? Evidence from Shopping Diary Data," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 431, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  2. Fumiko Hayashi & William R. Keeton, 2012. "Measuring the costs of retail payment methods," Economic Review, Federal Reserve Bank of Kansas City, issue Q II.
  3. Marc BOURREAU & Marianne VERDIER, 2010. "Cooperation for Innovation in Payment Systems: The Case of Mobile Payments," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(79), pages 95-114, 3rd quart.
  4. Carlos Arango & Angelika Welte, 2012. "The Bank of Canada’s 2009 Methods-of-Payment Survey: Methodology and Key Results," Discussion Papers 12-6, Bank of Canada.

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