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Choosing and using payment instruments: evidence from German microdata

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Listed author(s):
  • Von Kalckreuth, Ulf
  • Schmidt, Tobias
  • Stix, Helmut

Abstract

Germans are still very fond of using cash. Of all direct payment transactions, cash accounts for an astounding 82% in terms of number, and for 58% in terms of value. With a new and unique dataset that combines transaction information with survey data on payment behaviour of German consumers, we shed light on how individuals choose payment instruments and why cash remains so important. We propose a two-stage empirical framework which jointly explains credit card ownership and the use of cash. Our results indicate that the pattern of cash usage is compatible with systematic economic decision making. Consumers decide upon the adoption of payment cards and then use available payment media according to their transaction and personal characteristics, the relative costs of cash and card usage, and their assessment of payment instruments JEL Classification: E41, E58, D12

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File URL: https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1144.pdf
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Paper provided by European Central Bank in its series Working Paper Series with number 1144.

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Date of creation: Dec 2009
Handle: RePEc:ecb:ecbwps:20091144
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Keywords: cash substitution; cash usage; credit cards; debit cards; payment behaviour; payment cards; payment innovation; payment instruments; survey data;

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Find related papers by JEL classification:
  • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
  • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
  • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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