Advanced Search
MyIDEAS: Login

Why are (some) consumers (finally) writing fewer checks? The role of payment characteristics

Contents:

Author Info

  • Schuh, Scott
  • Stavins, Joanna

Abstract

Since the mid-1990s, the US payment system has undergone a transformation featuring a significant decline in the use of paper checks that is quite uneven across consumers and not well understood. This paper shows that characteristics of payment instruments are the most important determinants of instrument use by estimating econometric models of consumers' adoption (extensive margin) and use (intensive margin) of checks plus six other payment instruments with a comprehensive new data source. Changes in the relative convenience and cost of checks can explain directly about 34% and 11%, respectively, of the 8.4 percentage point decline in check share from 2003 to 2006. Changes in the relative characteristics of substitute payment instruments also likely contributed indirectly to the decline in check use through an increase in the number of payment instruments per consumer, but the exact magnitude of this indirect channel cannot be identified with available data.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6VCY-4XBX743-1/2/b2339dcca690233adf296b701a9eb312
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 34 (2010)
Issue (Month): 8 (August)
Pages: 1745-1758

as in new window
Handle: RePEc:eee:jbfina:v:34:y:2010:i:8:p:1745-1758

Contact details of provider:
Web page: http://www.elsevier.com/locate/jbf

Related research

Keywords: Money demand Checks Payment instruments Payment characteristics;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Klee, Elizabeth, 2008. "How people pay: Evidence from grocery store data," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 526-541, April.
  2. Marques Benton & Krista Blair & Marianne Crowe & Scott Schuh, 2007. "The Boston Fed study of consumer behavior and payment choice: a survey of Federal Reserve System employees," Public Policy Discussion Paper 07-1, Federal Reserve Bank of Boston.
  3. Jonathan Zinman, 2005. "Debit or credit?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston.
  4. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
  5. Wilko Bolt & Nicole Jonker & Corry van Renselaar, 2008. "Incentives at the counter: An empirical analysis of surcharging card payment and payment behaviour in the Netherlands," DNB Working Papers 196, Netherlands Central Bank, Research Department.
  6. Dubin, Jeffrey A & McFadden, Daniel L, 1984. "An Econometric Analysis of Residential Electric Appliance Holdings and Consumption," Econometrica, Econometric Society, vol. 52(2), pages 345-62, March.
  7. Daniel D. Garcia-Swartz & Robert W. Hahn & Anne Layne-Farrar, 2006. "The Move Toward a Cashless Society: A Closer Look at Payment Instrument Economics," Review of Network Economics, De Gruyter, vol. 5(2), pages 1.
  8. Fumiko Hayashi & Elizabeth Klee, 2003. "Technology Adoption and Consumer Payments: Evidence from Survey Data," Review of Network Economics, De Gruyter, vol. 2(2), pages 8.
  9. Orazio Attanasio & Luigi Guiso & Tuillo Jappelli, 1998. "The Demand for Money, Financial Innovation, and the Welfare Cost of Inflation: An Analysis with Household Data," NBER Working Papers 6593, National Bureau of Economic Research, Inc.
  10. Marc Rysman, 2006. "An Empirical Analysis of Payment Card Usage," Boston University - Department of Economics - Working Papers Series WP2006-002, Boston University - Department of Economics.
  11. Whitesell, William C, 1989. "The Demand for Currency versus Debitable Accounts: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(2), pages 246-57, May.
  12. Elizabeth Klee, 2006. "Families' use of payment instruments during a decade of change in the U.S. payment system," Finance and Economics Discussion Series 2006-01, Board of Governors of the Federal Reserve System (U.S.).
  13. David B. Humphrey & Lawrence B. Pulley & Jukka M. Vesala, 1996. "Cash, paper, and electronic payments: a cross-country analysis," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 914-941.
  14. Rotemberg, Julio J & Driscoll, John C & Poterba, James M, 1995. "Money, Output, and Prices: Evidence from a New Monetary Aggregate," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 67-83, January.
  15. Stacey L. Schreft, 2006. "How and why do consumers choose their payment methods?," Research Working Paper RWP 06-04, Federal Reserve Bank of Kansas City.
  16. Ron Borzekowski & Elizabeth K. Kiser & Shaista Ahmed, 2006. "Consumers' use of debit cards: patterns, preferences, and price response," Finance and Economics Discussion Series 2006-16, Board of Governors of the Federal Reserve System (U.S.).
  17. Guibourg, Gabriela & Segendorff, Bjorn, 2007. "A note on the price- and cost structure of retail payment services in the Swedish banking sector 2002," Journal of Banking & Finance, Elsevier, vol. 31(9), pages 2817-2827, September.
  18. Charles Sprenger & Joanna Stavins, 2008. "Credit card debt and payment use," Working Papers 08-2, Federal Reserve Bank of Boston.
  19. Andrew Ching & Fumiko Hayashi, 2006. "Payment card rewards programs and consumer payment choice," Payments System Research Working Paper PSR WP 06-02, Federal Reserve Bank of Kansas City.
  20. Brian Mantel, 2000. "Why do consumers pay bills electronically? an empirical analysis," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 32-48.
  21. Geoffrey R. Gerdes & Jack K . Walton II, 2002. "The use of checks and other noncash payment instruments in the United States," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Aug, pages 360-374.
  22. Carbó Valverde Santiago & Massoud Nadia & Rodríguez-Fernández Francisco & Saunders Anthony & Scholnick Barry, 2007. "The Economics of Credit Cards, Debit Cards and ATMs: A Survey and Some New Evidence," Working Papers 201074, Fundacion BBVA / BBVA Foundation.
  23. Eugene Amromin & Sujit Chakravorti, 2007. "Debit card and cash usage: a cross-country analysis," Working Paper Series WP-07-04, Federal Reserve Bank of Chicago.
  24. John V. Duca & William C. Whitesell, 1991. "Credit cards and money demand: a cross-sectional study," Research Paper 9112, Federal Reserve Bank of Dallas.
  25. Carow, Kenneth A. & Staten, Michael E., 1999. "Debit, credit, or cash: survey evidence on gasoline purchases," Journal of Economics and Business, Elsevier, vol. 51(5), pages 409-421, September.
  26. Geoffrey R. Gerdes & Jack K. Walton II & May X. Liu & Darrel W. Parke, 2005. "Trends in the use of payment instruments in the United States," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Spr, pages 180-201.
  27. Humphrey, David B & Kim, Moshe & Vale, Bent, 2001. "Realizing the Gains from Electronic Payments: Costs, Pricing, and Payment Choice," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 216-34, May.
  28. Barnett, William A & Fisher, Douglas & Serletis, Apostolos, 1992. "Consumer Theory and the Demand for Money," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 2086-2119, December.
  29. Hancock, Diana & Humphrey, David B., 1997. "Payment transactions, instruments, and systems: A survey," Journal of Banking & Finance, Elsevier, vol. 21(11-12), pages 1573-1624, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Hasman, Augusto & López, Ángel L. & SamartIín, Margarita, 2011. "Government, taxes and banking crises," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2761-2770, October.
  2. von Kalckreuth, Ulf & Schmidt, Tobias & Stix, Helmut, 2011. "Using cash to monitor liquidity: Implications for payments, currency demand and withdrawal behavior," Discussion Paper Series 1: Economic Studies 2011,22, Deutsche Bundesbank, Research Centre.
  3. Humphrey, David B., 2010. "Retail payments: New contributions, empirical results, and unanswered questions," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1729-1737, August.
  4. Tamás Briglevics & Oz Shy, 2012. "Why don’t most merchants use price discounts to steer consumer payment choice?," Public Policy Discussion Paper 12-9, Federal Reserve Bank of Boston.
  5. Wilko Bolt & Sujit Chakravorti, 2010. "Digitization of Retail Payment," DNB Working Papers 270, Netherlands Central Bank, Research Department.
  6. Kosse, Anneke & Jansen, David-Jan, 2013. "Choosing how to pay: The influence of foreign backgrounds," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 989-998.
  7. Nicole Jonker, 2011. "Card acceptance and surcharging: the role of costs and competition," DNB Working Papers 300, Netherlands Central Bank, Research Department.
  8. John Simon & Kylie Smith & Tim West, 2009. "Price Incentives and Consumer Payment Behaviour," RBA Research Discussion Papers rdp2009-04, Reserve Bank of Australia.
  9. Rochet, Jean-Charles & Wright, Julian, 2010. "Credit card interchange fees," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1788-1797, August.
  10. Anneke Kosse & David-Jan Jansen, 2011. "Choosing how to pay: the influence of home country habits," DNB Working Papers 328, Netherlands Central Bank, Research Department.
  11. Fumiko Hayashi & Joanna Stavins, 2012. "Effects of credit scores on consumer payment choice," Research Working Paper RWP 12-03, Federal Reserve Bank of Kansas City.
  12. Sergei Koulayev & Marc Rysman & Scott Schuh & Joanna Stavins, 2012. "Explaining adoption and use of payment instruments by U. S. consumers," Working Papers 12-14, Federal Reserve Bank of Boston.
  13. Fumiko Hayashi & Joanna Stavins, 2012. "Effects of credit scores on consumer payment choice," Public Policy Discussion Paper 12-1, Federal Reserve Bank of Boston.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:34:y:2010:i:8:p:1745-1758

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wendy Shamier).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.