The effect of government intervention on households' payment instrument choice

Using a novel household survey we are able to study how payment instrument choice changed before and after the regulatory changes that promoted the use of electronic payment instruments in Uruguay. Our results suggest that, after the regulatory changes, there was a substantial change in how households pay in Uruguay. First, we find an increase in the proportion of household holding bank accounts and credit cards, irrespective of the level of income. Thus, it could be inferred that the regulatory changes resulted in an improvement in access to financial services for all the households. It remains an open question whether the regulatory changes affected consumers differently. We show that high income households are the ones most likely to increase the use of debit and credit cards for their regular and monthly purchases. It can also be inferred from our results that the increase in the number of POS machines had a significant impact on the use of debit and credit cards and that the increase in the level of crime also results in an increase in the use of cards by households. Overall, this paper contributes to the discussion of who benefits with better access to financial services and the reduction in the costs of use of electronic payment instruments, and how this could be spurred to the whole population through regulatory changes promoted by the government.