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How people pay each other: Data, theory, and calibrations

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  • Greene, Claire
  • Prescott, Brian
  • Shy, Oz

Abstract

Using a representative sample of the U.S. adult population, we analyze which payment methods consumers use to pay other consumers (p2p) and how these choices depend on transaction and demographic characteristics. We construct a random matching model of consumers with diverse preferences over the use of payment methods for p2p payments. The model is calibrated to the share of p2p payments made with cash, checks, and electronic technologies from 2015 to 2019. We find about two-thirds of consumers have a first p2p payment preference for cash. One-third rank checks first. Approximately 94 percent of consumers rank electronic technologies second.

Suggested Citation

  • Greene, Claire & Prescott, Brian & Shy, Oz, 2022. "How people pay each other: Data, theory, and calibrations," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    • Handle: RePEc:eee:soceco:v:96:y:2022:i:c:s2214804321001282
    DOI: 10.1016/j.socec.2021.101788
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    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. Hayashi Fumiko & Klee Elizabeth, 2003. "Technology Adoption and Consumer Payments: Evidence from Survey Data," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-16, June.
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    6. Alvarez, Fernando & Lippi, Francesco, 2017. "Cash burns: An inventory model with a cash-credit choice," Journal of Monetary Economics, Elsevier, vol. 90(C), pages 99-112.
    7. Claire Greene & Oz Shy, 2020. "How Consumers Get Cash: Evidence from a Diary Survey," Consumer Payments Research Data Reports 2019-1, Federal Reserve Bank of Atlanta.
    8. Oz Shy, 2020. "Alternative Methods for Studying Consumer Payment Choice," FRB Atlanta Working Paper 2020-8, Federal Reserve Bank of Atlanta.
    9. Terri Bradford, 2017. "Banks Re-enter the P2P Payments Fray: With Mobile, Will this Time Be Different?," Payments System Research Briefing, Federal Reserve Bank of Kansas City, pages 1-6, January.
    10. Schuh, Scott & Stavins, Joanna, 2010. "Why are (some) consumers (finally) writing fewer checks? The role of payment characteristics," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1745-1758, August.
    11. Shy, Oz, 2020. "Low-income consumers and payment choice," Research in Economics, Elsevier, vol. 74(4), pages 292-300.
    12. Shy, Oz, 2021. "Cashless stores and cash users," Journal of Policy Modeling, Elsevier, vol. 43(3), pages 622-638.
    13. Greene, Claire & Prescott, Brian & Shy, Oz, 2022. "How people pay each other: Data, theory, and calibrations," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    14. Briglevics, Tamás & Schuh, Scott, 2014. "This is what's in your wallet... and how you use it," Working Paper Series 1684, European Central Bank.
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    16. Borzekowski, Ron & Kiser, Elizabeth K., 2008. "The choice at the checkout: Quantifying demand across payment instruments," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 889-902, July.
    17. Wallace, Neil & Zhu, Tao, 2004. "A commodity-money refinement in matching models," Journal of Economic Theory, Elsevier, vol. 117(2), pages 246-258, August.
    18. Claire Greene & Joanna Stavins, 2020. "The 2017 Diary of Consumer Payment Choice," Consumer Payments Research Data Reports 2018-5, Federal Reserve Bank of Atlanta.
    19. Yves Croissant, 2020. "mlogit: Random Utility Models in R," Post-Print hal-03019603, HAL.
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    1. Greene, Claire & Prescott, Brian & Shy, Oz, 2022. "How people pay each other: Data, theory, and calibrations," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).

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    More about this item

    Keywords

    Consumer payment choice; Person-to-person payments; Electronic payments; Mixed logit; Machine learning; Random matching;
    All these keywords.

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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