Explaining adoption and use of payment instruments by U.S. consumers

Motivated by recent policy intervention into payments markets that can lead to changes to the prices that consumers face for di erent payment instruments, this paper develops and estimates a structural model of adoption and use of payment instruments by U.S. consumers. We utilize a cross-section from the Survey of Consumer Payment Choice, a new survey of consumer behavior. Our structural model emphasizes the distinction between the adoption and use of a payment instrument. We evaluate substitution among payment instruments, as well welfare implications. We nd that cash is the most signi cant substitute to debit cards in retail settings, whereas checks are the most signi cant in bill-pay settings. Furthermore, we nd low income consumers lose proportionally more than high income consumers when debit cards become more expensive, whereas the reverse is true when credit cards do.