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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
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    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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    Bibliographic Info

    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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    Related research

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

    References

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    1. Sujit Chakravorti, 2000. "Why has stored value not caught on?," Emerging Issues, Federal Reserve Bank of Chicago, issue May.
    2. 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.
    3. Belk, Russell W, 1975. " Situational Variables and Consumer Behavior," Journal of Consumer Research, University of Chicago Press, vol. 2(3), pages 157-64, December.
    4. David Humphrey & Moshe Kim & Bent Vale, 1998. "Realizing the gains from electronic payments: costs, pricing, and payment choice," Proceedings 586, Federal Reserve Bank of Chicago.
    5. Barbara A. Good, 1997. "Electronic money," Working Paper 9716, Federal Reserve Bank of Cleveland.
    6. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
    7. 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.
    8. Lawrence J. Radecki, 1999. "Banks' payments-driven revenues," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 53-70.
    9. Theodore W. Schultz, 1962. "Reflections on Investment in Man," Journal of Political Economy, University of Chicago Press, vol. 70, pages 1.
    10. Freeman, Scott, 1996. "The Payments System, Liquidity, and Rediscounting," American Economic Review, American Economic Association, vol. 86(5), pages 1126-38, December.
    11. John C. Hershey & Howard C. Kunreuther & Paul J. H. Schoemaker, 1982. "Sources of Bias in Assessment Procedures for Utility Functions," Management Science, INFORMS, vol. 28(8), pages 936-954, August.
    12. 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.
    13. Lawrence J. Radecki, 1999. "Banks' payments-driven revenues," Staff Reports 62, Federal Reserve Bank of New York.
    14. Philip Bond & Robert Townsend, 1996. "Formal and informal financing in a Chicago neighborhood," Economic Perspectives, Federal Reserve Bank of Chicago, issue Jul, pages 3-27.
    15. Kirstin E. Wells, 1996. "Are checks overused?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 2-12.
    16. McFadden, Daniel, 1980. "Econometric Models for Probabilistic Choice among Products," The Journal of Business, University of Chicago Press, vol. 53(3), pages S13-29, July.
    17. Charles M. Kahn & William Roberds, 1999. "Real-time gross settlement and the costs of immediacy," Working Paper 98-21, Federal Reserve Bank of Atlanta.
    18. Celsi, Richard L & Olson, Jerry C, 1988. " The Role of Involvement in Attention and Comprehension Processes," Journal of Consumer Research, University of Chicago Press, vol. 15(2), pages 210-24, September.
    19. 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.
    20. 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.
    21. Daniel Kahneman & Jack L. Knetsch & Richard H. Thaler, 1991. "Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 193-206, Winter.
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    Cited by:
    1. Theodoro D. Cocca, 2002. "Transaktionskostentheoretische Betrachtung des Anlageverhaltens im Online-Handel und deren empirische Evidenz," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 138(IV), pages 439-464, December.
    2. Jyrkönen , Hanna, 2004. "Less cash on the counter: Forecasting Finnish payment preferences," Research Discussion Papers 27/2004, Bank of Finland.
    3. Brian Mantel & Timothy McHugh, 2001. "Competition and innovation in the consumer e-payments market? considering the demand, supply, and public policy issues," Occasional Paper; Emerging Payments EPS-2001-4, Federal Reserve Bank of Chicago.
    4. Zinman, Jonathan, 2009. "Debit or credit?," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 358-366, February.
    5. Stroborn, Karsten & Heitmann, Annika & Leibold, Kay & Frank, Gerda, 2004. "Internet payments in Germany: a classificatory framework and empirical evidence," Journal of Business Research, Elsevier, vol. 57(12), pages 1431-1437, December.

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