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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: http://www.bankofcanada.ca/en/res/dp/2009/dp09-8.pdf
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    Citations

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    Cited by:

    1. Stavins, Joanna, 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, 2012. "How consumers pay: adoption and use of payments," Working Papers 12-2, Federal Reserve Bank of Boston.
    3. repec:kap:jfsres:v:52:y:2017:i:1:d:10.1007_s10693-017-0270-9 is not listed on IDEAS
    4. Kosse, Anneke, 2013. "Do newspaper articles on card fraud affect debit card usage?," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5382-5391.
    5. 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.
    6. 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.
    7. 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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