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The Impact of Retail Payment Innovations on Cash Usage

  • Ben Fung
  • Kim Huynh
  • Leonard Sabetti

Many predict that innovations in retail payment may render cash obsolete. We investigate this possibility in the context of recent payment innovations such as contactless-credit and stored-value cards. We apply causal inference methods on the 2009 Bank of Canada Method of Payment survey, a representative sample of adult Canadians’ shopping behaviour for retail consumption over a three-day period. We find that using contactless credit cards and stored-value cards lead to a reduction in average cash usage for transactions both in terms of value and volume. Sensitivity analysis is undertaken and our estimates are robust to hidden bias.

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File URL: http://www.bankofcanada.ca/wp-content/uploads/2012/05/wp2012-14_revised.pdf
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Paper provided by Bank of Canada in its series Working Papers with number 12-14.

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Length: 34 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:bca:bocawp:12-14
Contact details of provider: Postal: 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada
Phone: 613 782-8845
Fax: 613 782-8874
Web page: http://www.bank-banque-canada.ca/

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  1. Victor Stango, 2000. "Competition And Pricing In The Credit Card Market," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 499-508, August.
  2. Arango, Carlos & Huynh, Kim P. & Sabetti, Leonard, 2011. "How do you pay? The role of incentives at the point-of-sale," Working Paper Series 1386, European Central Bank.
  3. Ron Borzekowski & Elizabeth K. Kiser, 2006. "The choice at the checkout: quantifying demand across payment instruments," Finance and Economics Discussion Series 2006-17, Board of Governors of the Federal Reserve System (U.S.).
  4. Helmut Stix, 2003. "How Do Debit Cards Affect Cash Demand? Survey Data Evidence," Working Papers 82, Oesterreichische Nationalbank (Austrian Central Bank).
  5. Hiroshi Fujiki & Migiwa Tanaka, 2009. "Demand for Currency, New Technology and the Adoption of Electronic Money: Evidence Using Individual Household Data," IMES Discussion Paper Series 09-E-27, Institute for Monetary and Economic Studies, Bank of Japan.
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