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Cash, Paper, and Electronic Payments: A Cross-Country Analysis

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Author Info
Humphrey, David B
Pulley, Lawrence B
Vesala, Jukka M
Abstract

The social cost of a payment system comprises between 1% to 1.5% of GDP. This cost can be reduced if non-cash payments shift from paper to electronics since the cost of an electronic payment is estimated to be from one-third to one-half that of a paper-based transaction. We examine the use of cash and five non-cash payment instruments in 14 developed countries over 1987-1993. Our purpose is (1) to outline the current use of check, paper giro, electronic giro, credit card, and debit card payments and (2) to determine why some payment instruments are used more intensively than others, especially electronic versus paper-based payments. Standard demand theory influences (own price and incomes, institutional factors, and simple availability measures across countries are examined, as is the effect of habit formation. Payment substitution relationships are also estimated and indicate that checks will decline with further growth of electronic payments while the instruments that make up electronic payments will tend to expand together rather than replace one another. Copyright 1996 by Ohio State University Press.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 28 (1996)
Issue (Month): 4 (November)
Pages: 914-39
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Handle: RePEc:mcb:jmoncb:v:28:y:1996:i:4:p:914-39

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  1. Nicole Jonker, 2005. "Payment Instruments as Perceived by Consumers - a Public Survey," DNB Working Papers 053, Netherlands Central Bank, Research Department. [Downloadable!]
  2. Anthony M. Santomero & John J. Seater, 1995. "Alternative Monies and the Demand for Media of Exchange," Center for Financial Institutions Working Papers 96-08, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
    Other versions:
  3. William R. Emmons, 1997. "Recent developments in wholesale payments systems," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 23-43. [Downloadable!]
  4. Humphrey, David B. & Keppler, Robert H. & Montes-Negret, Fernando, 1997. "Cost recovery and pricing of payment services," Policy Research Working Paper Series 1833, The World Bank. [Downloadable!]
  5. Franklin Allen & James McAndrews & Philip Strahan, 2001. "E-Finance: An Introduction," Center for Financial Institutions Working Papers 01-36, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
    Other versions:
  6. Sheri M. Markose & Yiing Jia Loke, 2002. "Can cash hold its own? International comparisons: Theory and evidence," Economics Discussion Papers 536, University of Essex, Department of Economics. [Downloadable!]
  7. Bernardo Batiz-Lazo & Douglas Wood, 2003. "Corportate strategy, centralisation and outsourcing in banking: case studies on paper payment processing," Economic History 0301005, EconWPA. [Downloadable!]
  8. 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, Concept Economics, vol. 5(2), pages 175-198, June. [Downloadable!]
  9. Ramon Marimon & Juan Pablo Nicolini & Pedro Teles, 1997. "Electronic money: the end of inflation?," Discussion Paper / Institute for Empirical Macroeconomics 122, Federal Reserve Bank of Minneapolis. [Downloadable!]
  10. David T. Llewellyn, 1999. "The New Economics of Banking," SUERF Studies, SUERF - The European Money and Finance Forum, number 5 edited by Morten Balling, October. [Downloadable!]
  11. 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. [Downloadable!]
  12. Carmona, Guilherme, 2002. "Monetary Trading: An Optimal Exchange System," FEUNL Working Paper Series wp420, Universidade Nova de Lisboa, Faculdade de Economia. [Downloadable!]
    Other versions:
  13. William R. Emmons, 1996. "Price stability and the efficiency of the retail payments system," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 49-61. [Downloadable!]
  14. Nilssen,T., 2000. "Risk externalities in a payments oligopoly," Memorandum 10/2000, Oslo University, Department of Economics. [Downloadable!]
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