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The Impact of Retail Payment Innovations on Cash Usage

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  • Ben Fung
  • Kim Huynh
  • Leonard Sabetti

Abstract

Many predict that innovations in retail payment may render cash obsolete. We investigate this possibility in the context of recent payment innovations such as contactless-credit and stored-value cards. We apply causal inference methods on the 2009 Bank of Canada Method of Payment survey, a representative sample of adult Canadians’ shopping behaviour for retail consumption over a three-day period. We find that using contactless credit cards and stored-value cards lead to a reduction in average cash usage for transactions both in terms of value and volume. Sensitivity analysis is undertaken and our estimates are robust to hidden bias.

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File URL: http://www.bankofcanada.ca/wp-content/uploads/2012/05/wp2012-14_revised.pdf
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Bibliographic Info

Paper provided by Bank of Canada in its series Working Papers with number 12-14.

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Length: 34 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:bca:bocawp:12-14

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Phone: 613 782-8845
Fax: 613 782-8874
Web page: http://www.bank-banque-canada.ca/

Related research

Keywords: Econometric and statistical methods; Financial services; Payment; clearing; and settlement systems;

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References

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  1. Arango, Carlos & Huynh, Kim P. & Sabetti, Leonard, 2011. "How do you pay? The role of incentives at the point-of-sale," Working Paper Series, European Central Bank 1386, European Central Bank.
  2. Helmut Stix, 2003. "How Do Debit Cards Affect Cash Demand? Survey Data Evidence," Working Papers 82, Oesterreichische Nationalbank (Austrian Central Bank).
  3. Borzekowski, Ron & Kiser, Elizabeth K., 2008. "The choice at the checkout: Quantifying demand across payment instruments," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 26(4), pages 889-902, July.
  4. Hiroshi Fujiki & Migiwa Tanaka, 2009. "Demand for Currency, New Technology and the Adoption of Electronic Money: Evidence Using Individual Household Data," IMES Discussion Paper Series 09-E-27, Institute for Monetary and Economic Studies, Bank of Japan.
  5. Victor Stango, 2000. "Competition And Pricing In The Credit Card Market," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 499-508, August.
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Citations

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Cited by:
  1. Heng Chen & Marie-Hélène Felt & Kim Huynh, 2014. "Retail Payment Innovations and Cash Usage: Accounting for Attrition Using Refreshment Samples," Working Papers, Bank of Canada 14-27, Bank of Canada.
  2. Damar, H. Evren & Gropp, Reint & Mordel, Adi, 2013. "Bank's financial distress, lending supply and consumption expenditure," SAFE Working Paper Series 39, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
  3. John Bagnall & David Bounie & Kim Huynh & Anneke Kosse & Tobias Schmidt & Scott Schuh & Helmut Stix, 2014. "Consumer cash usage: A cross-country comparison with payment diary survey data," DNB Working Papers, Netherlands Central Bank, Research Department 422, Netherlands Central Bank, Research Department.
  4. Carlos Arango & Yassine Bouhdaouiz & David Bounie & Martina Eschelbach & LOla Hernández, 2014. "Cash Management and Payment Choices: A Simulation Model with International Comparisons," Borradores de Economia 804, Banco de la Republica de Colombia.
  5. Carlos Arango & Yassine Bouhdaoui & David Bounie & Martina Eschelbach, 2014. "Cash Management and Payment Choices: A Simulation Model with International Comparisons," BORRADORES DE ECONOMIA 011124, BANCO DE LA REPÚBLICA.
  6. Ben Fung & Miguel Molico & Gerald Stuber, 2014. "Electronic Money and Payments: Recent Developments and Issues," Discussion Papers 14-2, Bank of Canada.
  7. Briglevics, Tamas & Schuh, Scott, 2014. "This is what's in your wallet... and here's how you use it," Working Papers, Federal Reserve Bank of Boston 14-5, Federal Reserve Bank of Boston.
  8. H. Evren Damar & Reint Group & Adi Mordel, 2014. "Banks’ Financial Distress, Lending Supply and Consumption Expenditure," Working Papers, Bank of Canada 14-7, Bank of Canada.
  9. 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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