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Debit card and cash usage: a cross-country analysis

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Abstract

During the last decade, debit card transactions grew rapidly in most advanced countries. While check usage declined and has almost disappeared in some countries, the stock of currency in circulation has not declined as fast. We use panel estimation techniques to analyze the change in transactional demand for cash resulting from greater usage of debit cards in 13 countries from 1988 to 2003. We are able to disentangle cash?s store of value function from its payment function by separating cash into three denomination categories. We find that the demand for low denomination notes and coins decreases as debit card usage increases because merchants need to make less change for customer purchases. On the other hand, the demand for high denomination notes is generally less affected suggesting that these denomination notes are also used for non-transactional purposes.

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  • Gene Amromin & Sujit Chakravorti, 2007. "Debit card and cash usage: a cross-country analysis," Working Paper Series WP-07-04, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:wp-07-04
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    2. Nadia Mbazia, 2023. "Do Payment Technology Innovations Affect Currency Demand in Tunisia?," International Journal of Economics and Financial Issues, Econjournals, vol. 13(1), pages 164-171, January.
    3. Ulf Kalckreuth & Tobias Schmidt & Helmut Stix, 2014. "Choosing and using payment instruments: evidence from German microdata," Empirical Economics, Springer, vol. 46(3), pages 1019-1055, May.
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    5. Vania Silva & Esmeralda Ramalho & Carlos Vieira, 2016. "Is EMV adoption changing card payments? Evidence from the European Union," CEFAGE-UE Working Papers 2016_05, University of Evora, CEFAGE-UE (Portugal).
    6. Henryk Gurgul & Marcin Suder, 2013. "The Properties of ATMs Development Stages - an Empirical Analysis," Statistics in Transition new series, Główny Urząd Statystyczny (Polska), vol. 14(3), pages 443-466, September.
    7. Hyytinen Ari & Takalo Tuomas, 2009. "Consumer Awareness and the Use of Payment Media: Evidence from Young Finnish Consumers," Review of Network Economics, De Gruyter, vol. 8(2), pages 1-25, June.
    8. Schuh, Scott & Stavins, Joanna, 2010. "Why are (some) consumers (finally) writing fewer checks? The role of payment characteristics," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1745-1758, August.
    9. Tobias Trütsch, 2014. "The Impact of Contactless Payment on Spending," International Journal of Economic Sciences, Prague University of Economics and Business, vol. 2014(4), pages 70-98.
    10. Fujiki, Hiroshi & Tanaka, Migiwa, 2014. "Currency demand, new technology, and the adoption of electronic money: Micro evidence from Japan," Economics Letters, Elsevier, vol. 125(1), pages 5-8.
    11. Hyytinen Ari & Takalo Tuomas, 2009. "Consumer Awareness and the Use of Payment Media: Evidence from Young Finnish Consumers," Review of Network Economics, De Gruyter, vol. 8(2), pages 1-25, June.
    12. Tobias Truetsch, 2014. "The Impact of Contactless Payment on Spending," Proceedings of International Academic Conferences 0702228, International Institute of Social and Economic Sciences.
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    15. Andrea Mercatanti & Fan Li, 2017. "Do debit cards decrease cash demand?: causal inference and sensitivity analysis using principal stratification," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 66(4), pages 759-776, August.
    16. Kopsakangas-Savolainen Maria & Takalo Tuomas, 2014. "Competition Before Sunset: The Case of the Finnish ATM Market," Review of Network Economics, De Gruyter, vol. 13(1), pages 1-33, March.
    17. Serhan Cevik, 2020. "Dirty money: Does the risk of infectious disease lower demand for cash?," International Finance, Wiley Blackwell, vol. 23(3), pages 460-471, December.
    18. Łukasz Goczek & Bartosz Witkowski, 2015. "Card Payments in Poland: Determinants and Prospects," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 159-177.
    19. repec:zbw:bofrdp:2012_032 is not listed on IDEAS
    20. Henryk Gurgul & Marcin Suder, 2013. "Modeling of withdrawals from selected ATMs of the "Euronet" network," Managerial Economics, AGH University of Science and Technology, Faculty of Management, vol. 13, pages 65-82.
    21. Kopsakangas-Savolainen Maria & Takalo Tuomas, 2014. "Competition Before Sunset: The Case of the Finnish ATM Market," Review of Network Economics, De Gruyter, vol. 13(1), pages 1-33, March.
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    Keywords

    Debit cards; Cash flow; Payment systems;
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