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Price incentives and consumer payment behaviour

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Listed:
  • Simon, John
  • Smith, Kylie
  • West, Tim

Abstract

In this paper we estimate the effect of particular price incentives on consumer payment patterns using transaction-level data. We find that participation in a loyalty program and access to an interest-free period tend to increase credit card use at the expense of alternative payment methods, such as debit cards and cash. Interestingly though, the pattern of substitution from cash and debit cards differs according to the price incentive. An implication of the findings is that the Reserve Bank reforms of the Australian payments system are likely to have influenced observed payment patterns.

Suggested Citation

  • Simon, John & Smith, Kylie & West, Tim, 2010. "Price incentives and consumer payment behaviour," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1759-1772, August.
  • Handle: RePEc:eee:jbfina:v:34:y:2010:i:8:p:1759-1772
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    References listed on IDEAS

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    More about this item

    Keywords

    Consumer choice Retail payment systems Price incentives Loyalty programs;

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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