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Identity Theft and Consumer Payment Choice: Does Security Really Matter?

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  • Charles M. Kahn

    () (University of Illinois)

  • José M. Liñares-Zegarra

    () (University of Essex)

Abstract

Abstract Security is a critical aspect of electronic payment systems. In recent years, the phenomenon of identity theft has gained widespread media coverage and has grown to be a major concern for payment providers and consumers alike. How identity theft has affected consumer’s payment choice is still an open research question. We use the 2009 Survey of Consumer Payment Choice (SCPC) to study the effect of identity theft incidents on adoption and usage patterns for nine different payment instruments in the U.S. Our results suggest that certain types of identity theft incidents affect positively the probability of adopting money orders, credit cards, stored value cards, bank account number payments and online banking bill payments. As for payment usage, we find that particular types of identity theft incidents have a positive and statistically significant effect on the use of cash, money orders and credit cards and a negative and statistically significant effect on the use of checks and online banking bill payments. These results are robust across different types of transaction, after controlling for various socio-demographic characteristics and perceptions toward payment methods.

Suggested Citation

  • Charles M. Kahn & José M. Liñares-Zegarra, 2016. "Identity Theft and Consumer Payment Choice: Does Security Really Matter?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 50(1), pages 121-159, August.
    • Handle: RePEc:kap:jfsres:v:50:y:2016:i:1:d:10.1007_s10693-015-0218-x
    DOI: 10.1007/s10693-015-0218-x
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    References listed on IDEAS

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    Cited by:

    1. Cheney, Julia S. & Hunt, Robert M. & Mikhed, Vyacheslav & Ritter, Dubravka & Vogan, Michael, 2014. "Identity theft as a teachable moment," Working Papers 14-28, Federal Reserve Bank of Philadelphia.
    2. Mikhed, Vyacheslav & Vogan, Michael, 2017. "How Data Breaches Affect Consumer Credit," Working Papers 17-6, Federal Reserve Bank of Philadelphia, revised 16 Nov 2017.

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