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The Costs of Point-of-Sale Payments in Canada

Author

Listed:
  • Anneke Kosse
  • Heng Chen
  • Marie-Hélène Felt
  • Valéry Dongmo Jiongo
  • Kerry Nield
  • Angelika Welte

Abstract

This study provides insight into the costs of cash, debit card and credit card payments made at the point of sale in Canada in 2014. For each payment method, it examines the total resource costs, which capture the overall use of resources by society as a whole. Using extensive survey data from retailers, financial institutions and cash transportation companies as well as internal and external data sources, the results show that the resource costs of payments in Canada are non-negligible (0.78 per cent of GDP). Credit cards are most costly in terms of resource costs per transaction, while cash carries the highest resource costs per dollar transacted. Debit cards are the least costly, both in terms of costs per transaction and costs per dollar in sales. The study also demonstrates how the costs vary with transaction sizes. Considering the variable resource costs only, cash is found to be cheapest for transactions up to $6, while debit cards are the least costly for transactions larger than $6. The study also looks into the total private costs, which are the costs incurred by each stakeholder, thereby providing insight into how costs are affecting the use and acceptance of payment methods.

Suggested Citation

  • Anneke Kosse & Heng Chen & Marie-Hélène Felt & Valéry Dongmo Jiongo & Kerry Nield & Angelika Welte, 2017. "The Costs of Point-of-Sale Payments in Canada," Discussion Papers 17-4, Bank of Canada.
  • Handle: RePEc:bca:bocadp:17-4
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    File URL: http://www.bankofcanada.ca/wp-content/uploads/2017/03/sdp2017-4.pdf
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    References listed on IDEAS

    as
    1. John Bagnall & David Bounie & Kim P. Huynh & Anneke Kosse & Tobias Schmidt & Scott Schuh, 2016. "Consumer Cash Usage: A Cross-Country Comparison with Payment Diary Survey Data," International Journal of Central Banking, International Journal of Central Banking, vol. 12(4), pages 1-61, December.
    2. Carlos Arango & Angelika Welte, 2012. "The Bank of Canada’s 2009 Methods-of-Payment Survey: Methodology and Key Results," Discussion Papers 12-6, Bank of Canada.
    3. Carlos Arango & Kim Huynh & Ben Fung & Gerald Stuber, 2012. "The Changing Landscape for Retail Payments in Canada and the Implications for the Demand for Cash," Bank of Canada Review, Bank of Canada, vol. 2012(Autumn), pages 31-40.
    4. Arango, Carlos & Huynh, Kim P. & Sabetti, Leonard, 2015. "Consumer payment choice: Merchant card acceptance versus pricing incentives," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 130-141.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Bank notes; Financial Institutions; Payment clearing and settlement systemsing;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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