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Why don't consumers use electronic banking products? towards a theory of obstacles, incentives, and opportunities

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Brian Mantel
Abstract

This paper proposes a framework for describing why consumers use electronic banking products such as electronic bill payment, credit cards, debit cards, stored value, and e-cash. The paper surveys the literature; reports on the results of several studies, and develops a framework for evaluating consumer electronic banking usage. The framework includes three primary factors that explain consumer electronic banking usage: (1) household wealth, (2) personal preferences (e.g., convenience, budgeting, control, incentives, involvement, security), and (3) transaction-specific factors (e.g., dollar size, variability of dollar amount, offline versus online location, etc.). A number of ad hoc theories could be created to explain payment instrument successes on a case by case basis. However, the author proposes that this general decision-making framework is a superior tool for management and public policy analysis because of its simplicity, ability to explain a range of outcomes, and ability to develop testable forecasts.

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Paper provided by Federal Reserve Bank of Chicago in its series Occasional Paper; Emerging Payments with number EPS-2000-1.

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Date of creation: 2000
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Handle: RePEc:fip:fedhop:eps-2000-1

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Keywords: Payment systems Electronic commerce Electronic funds transfers Consumer credit Consumers

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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.:
  1. 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. [Downloadable!] (restricted)
  2. Belk, Russell W, 1975. " Situational Variables and Consumer Behavior," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 2(3), pages 157-64, December.
  3. Sujit Chakravorti, 2000. "Why has stored value not caught on?," Emerging Issues, Federal Reserve Bank of Chicago, issue May. [Downloadable!]
  4. 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. [Downloadable!] (restricted)
  5. McFadden, Daniel, 1980. "Econometric Models for Probabilistic Choice among Products," Journal of Business, University of Chicago Press, vol. 53(3), pages S13-29, July. [Downloadable!] (restricted)
  6. Murphy, Neil B., 1991. "Determinants of household check writing: the impacts of the use of electronic banking services and alternative pricing of services," Financial Services Review, Elsevier, vol. 1(1), pages 35-44. [Downloadable!] (restricted)
  7. Joanna Stavins, 1996. "Can demand elasticities explain sticky credit card rates?," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 43-54. [Downloadable!]
  8. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1991. "The Endowment Effect, Loss Aversion, and Status Quo Bias: Anomalies," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 193-206, Winter. [Downloadable!] (restricted)
  9. Joanna Stavins, 1999. "Checking accounts: what do banks offer and what do consumers value?," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 3-14. [Downloadable!]
  10. David Humphrey & Moshe Kim & Bent Vale, 1998. "Realizing the gains from electronic payments: costs, pricing, and payment choice," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 158-164.
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  11. Barbara A. Good, 1997. "Electronic money," Working Paper 9716, Federal Reserve Bank of Cleveland. [Downloadable!]
  12. Theodore W. Schultz, 1962. "Reflections on Investment in Man," Journal of Political Economy, University of Chicago Press, vol. 70, pages 1. [Downloadable!] (restricted)
  13. Celsi, Richard L & Olson, Jerry C, 1988. "The Role of Involvement in Attention and Comprehension Processes," Journal of Consumer Research: An Interdisciplinary Quarterly, University of Chicago Press, vol. 15(2), pages 210-24, September.
  14. Freeman, Scott, 1996. "The Payments System, Liquidity, and Rediscounting," American Economic Review, American Economic Association, vol. 86(5), pages 1126-38, December. [Downloadable!] (restricted)
  15. Lawrence J. Radecki, 1999. "Banks' payments-driven revenues," Staff Reports 62, Federal Reserve Bank of New York. [Downloadable!]
  16. Kahn, Charles M. & Roberds, William, 2001. "Real-time gross settlement and the costs of immediacy," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 299-319, April. [Downloadable!] (restricted)
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  17. Kirstin E. Wells, 1996. "Are checks overused?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 2-12. [Downloadable!]
  18. Lawrence J. Radecki, 1999. "Banks' payments-driven revenues," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 53-70. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. 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!]
  2. Jonathan Zinman, 2005. "Debit or credit?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston. [Downloadable!]
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