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The Role of Convenience and Risk in Consumers' Means of Payment

Author

Listed:
  • Carlos Arango
  • Varya Taylor

Abstract

Using data from a 2004 survey of the Canadian public, the authors study the role of convenience and risk in consumers' use of cash relative to debit and credit cards. The authors find that consumers who perceive debit cards and credit cards to be more convenient and less risky than cash use them more frequently. Even at low levels of perceived risk, consumers shift substantially away from cash and towards alternative payment methods. However, the authors' results reveal that there exists a lower bound for which cards can substitute for cash. Also, as other studies have shown, the relative use of cash is higher among older, less-educated, lower-income consumers.

Suggested Citation

  • Carlos Arango & Varya Taylor, 2009. "The Role of Convenience and Risk in Consumers' Means of Payment," Discussion Papers 09-8, Bank of Canada.
    • Handle: RePEc:bca:bocadp:09-8
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    File URL: https://www.bankofcanada.ca/wp-content/uploads/2010/01/dp09-8.pdf
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    Citations

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    Cited by:

    1. Joanna Stavins, 2013. "Security of retail payments: the new strategic objective," Public Policy Discussion Paper 13-9, Federal Reserve Bank of Boston.
    2. Scott Schuh & Joanna Stavins, 2013. "How Consumers Pay: Adoption and Use of Payments," Accounting and Finance Research, Sciedu Press, vol. 2(2), pages 1-1, May.
    3. Charles M. Kahn & José M. Liñares-Zegarra & Joanna Stavins, 2017. "Are there Social Spillovers in Consumers’ Security Assessments of Payment Instruments?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 52(1), pages 5-34, October.
    4. Cologgi, Massimiliano, 2023. "The impact of regulation on retail payments security: Evidence from Italian supervisory data," Finance Research Letters, Elsevier, vol. 54(C).
    5. Egor Krivosheya & Polina Belyakova, 2019. "Financial innovations role in consumer behavior at Russian retail payments market," Proceedings of Economics and Finance Conferences 9511955, International Institute of Social and Economic Sciences.
    6. Martínez Ventura, Constanza, 2019. "El uso de efectivo y tarjetas débito como instrumentos de pago en Colombia," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue 90, pages 71-95, January.
    7. Kosse, Anneke, 2013. "Do newspaper articles on card fraud affect debit card usage?," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5382-5391.
    8. Constanza Martínez Ventura, 2019. "The use of cash and debit cards as payment instruments in Colombia," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 90, pages 71-95, Enero - J.
    9. Carlos Arango & Kim Huynh & Leonard Sabetti, 2011. "How Do You Pay? The Role of Incentives at the Point-of-Sale," Staff Working Papers 11-23, Bank of Canada.

    More about this item

    Keywords

    Bank notes;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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