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A game changer in payment habits: evidence from daily data during a pandemic

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  • Guerino Ardizzi

    (Bank of Italy)

  • Andrea Nobili

    (Bank of Italy)

  • Giorgia Rocco

    (Bank of Italy)

Abstract

We explore the relationship between cash and other payment instruments using the outbreak of the COVID-19 pandemic as a natural experiment exogenously affecting both the payment industry and consumers’ habits. We rely on Google search data, as well as on the official series of new cases of infection to measure the intensity of the pandemic, and apply local projection methods to assess the effects on payment habits. We find a large and persistent substitution effect from cash to card-based transactions, especially using contactless and e-commerce options. The fear of infection has led to a new implicit cost associated to each payment instrument, thus affecting payment choices from the demand-side and boosting consumption with non-cash transactions. Moreover, technical constraints on the cash cycle and the lockdown measures have increased the demand for cash for precautionary purposes. Policies aiming at accelerating the digital economy and the most innovative means of payment can potentially make economic activity more resilient to adverse shocks. At the same time, ensuring the adequate and efficient availability of cash remains essential from a social and economic perspective.

Suggested Citation

  • Guerino Ardizzi & Andrea Nobili & Giorgia Rocco, 2020. "A game changer in payment habits: evidence from daily data during a pandemic," Questioni di Economia e Finanza (Occasional Papers) 591, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:opques:qef_591_20
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    Cited by:

    1. Coletti Gabriele & Alberto Di Iorio & Emanuele Pimpini & Giorgia Rocco, 2022. "Report On The Payment Attitudes Of Consumers In Italy: Results From Ecb Surveys," Temi di discussione (Economic working papers) 21, Bank of Italy, Economic Research and International Relations Area.
    2. Seitz, Franz & Rösl, Gerhard, 2022. "On the Stabilizing Role of Cash for Societies," MPRA Paper 113784, University Library of Munich, Germany.
    3. Francesco Berardini & Fabrizio Renzi, 2022. "Mind the Gap! The (unexpected) impact of COVID-19 pandemic on VAT revenue in Italy," Questioni di Economia e Finanza (Occasional Papers) 669, Bank of Italy, Economic Research and International Relations Area.
    4. Valentina Aprigliano & Guerino Ardizzi & Alessia Cassetta & Alessandro Cavallero & Simone Emiliozzi & Alessandro Gambini & Nazzareno Renzi & Roberta Zizza, 2021. "Exploiting payments to track Italian economic activity: the experience at Banca d’Italia," Questioni di Economia e Finanza (Occasional Papers) 609, Bank of Italy, Economic Research and International Relations Area.
    5. Radoslaw Kotkowski & Michal Polasik, 2021. "COVID-19 pandemic increases the divide between cash and cashless payment users in Europe," NBP Working Papers 339, Narodowy Bank Polski, Economic Research Department.
    6. Kotkowski, Radoslaw & Polasik, Michal, 2021. "COVID-19 pandemic increases the divide between cash and cashless payment users in Europe," Economics Letters, Elsevier, vol. 209(C).
    7. Tatjana Dahlhaus & Angelika Welte, 2021. "Payment Habits During COVID-19: Evidence from High-Frequency Transaction Data," Staff Working Papers 21-43, Bank of Canada.
    8. Gerhard Fenz & Helmut Stix, 2021. "Monitoring the economy in real time with the weekly OeNB GDP indicator: background, experience and outlook," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue Q4/20-Q1/, pages 17-40.
    9. Luca Baldo & Elisa Bonifacio & Marco Brandi & Michelina Lo Russo & Gianluca Maddaloni & Andrea Nobili & Giorgia Rocco & Gabriele Sene & Massimo Valentini, 2021. "Inside the black box: tools for understanding cash circulation," Mercati, infrastrutture, sistemi di pagamento (Markets, Infrastructures, Payment Systems) 7, Bank of Italy, Directorate General for Markets and Payment System.
    10. Rösl, Gerhard & Seitz, Franz, 2021. "Cash and crises: No surprises by the virus," IMFS Working Paper Series 150, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).

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    More about this item

    Keywords

    COVID-19 pandemic; cash; payment habits; unconventional data;
    All these keywords.

    JEL classification:

    • 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
    • G2 - Financial Economics - - Financial Institutions and Services
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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