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Why don't consumers use electronic banking products? towards a theory of obstacles, incentives, and opportunities

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  • Brian Mantel

Abstract

This paper proposes a framework for describing why consumers use electronic banking products such as electronic bill payment, credit cards, debit cards, stored value, and e-cash. The paper surveys the literature; reports on the results of several studies, and develops a framework for evaluating consumer electronic banking usage. The framework includes three primary factors that explain consumer electronic banking usage: (1) household wealth, (2) personal preferences (e.g., convenience, budgeting, control, incentives, involvement, security), and (3) transaction-specific factors (e.g., dollar size, variability of dollar amount, offline versus online location, etc.). A number of ad hoc theories could be created to explain payment instrument successes on a case by case basis. However, the author proposes that this general decision-making framework is a superior tool for management and public policy analysis because of its simplicity, ability to explain a range of outcomes, and ability to develop testable forecasts.

Suggested Citation

  • Brian Mantel, 2000. "Why don't consumers use electronic banking products? towards a theory of obstacles, incentives, and opportunities," Occasional Paper; Emerging Payments EPS-2000-1, Federal Reserve Bank of Chicago.
  • Handle: RePEc:fip:fedhop:eps-2000-1
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    References listed on IDEAS

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    1. Celsi, Richard L & Olson, Jerry C, 1988. " The Role of Involvement in Attention and Comprehension Processes," Journal of Consumer Research, Oxford University Press, vol. 15(2), pages 210-224, September.
    2. Barbara A. Good, 1997. "Electronic money," Working Paper 9716, Federal Reserve Bank of Cleveland.
    3. Freeman, Scott, 1996. "The Payments System, Liquidity, and Rediscounting," American Economic Review, American Economic Association, vol. 86(5), pages 1126-1138, December.
    4. Chakravorti, Sujit, 2004. "Why has stored-value not caught on?," Journal of Financial Transformation, Capco Institute, vol. 12, pages 39-48.
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    6. Philip Bond & Robert M. Townsend, 1996. "Formal and informal financing in a Chicago neighborhood," Economic Perspectives, Federal Reserve Bank of Chicago, issue Jul, pages 3-27.
    7. Daniel Kahneman & Jack L. Knetsch & Richard H. Thaler, 1991. "Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 193-206, Winter.
    8. Joanna Stavins, 1999. "Checking accounts: what do banks offer and what do consumers value?," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 3-14.
    9. Humphrey, David B & Kim, Moshe & Vale, Bent, 2001. "Realizing the Gains from Electronic Payments: Costs, Pricing, and Payment Choice," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(2), pages 216-234, May.
    10. McFadden, Daniel, 1980. "Econometric Models for Probabilistic Choice among Products," The Journal of Business, University of Chicago Press, vol. 53(3), pages 13-29, July.
    11. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
    12. Joanna Stavins, 1996. "Can demand elasticities explain sticky credit card rates?," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 43-54.
    13. Kahn, Charles M. & Roberds, William, 2001. "Real-time gross settlement and the costs of immediacy," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 299-319, April.
    14. Carow, Kenneth A. & Staten, Michael E., 1999. "Debit, credit, or cash: survey evidence on gasoline purchases," Journal of Economics and Business, Elsevier, vol. 51(5), pages 409-421, September.
    15. Murphy, Neil B., 1991. "Determinants of household check writing: the impacts of the use of electronic banking services and alternative pricing of services," Financial Services Review, Elsevier, vol. 1(1), pages 35-44.
    16. Theodore W. Schultz, 1962. "Reflections on Investment in Man," Journal of Political Economy, University of Chicago Press, vol. 70, pages 1-1.
    17. Lawrence J. Radecki, 1999. "Banks' payments-driven revenues," Staff Reports 62, Federal Reserve Bank of New York.
    18. Lawrence J. Radecki, 1999. "Banks' payments-driven revenues," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 53-70.
    19. Hancock, Diana & Humphrey, David B., 1997. "Payment transactions, instruments, and systems: A survey," Journal of Banking & Finance, Elsevier, vol. 21(11-12), pages 1573-1624, December.
    20. Belk, Russell W, 1975. " Situational Variables and Consumer Behavior," Journal of Consumer Research, Oxford University Press, vol. 2(3), pages 157-164, December.
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    Citations

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    Cited by:

    1. Zinman, Jonathan, 2009. "Debit or credit?," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 358-366, February.
    2. Stroborn, Karsten & Heitmann, Annika & Leibold, Kay & Frank, Gerda, 2004. "Internet payments in Germany: a classificatory framework and empirical evidence," Journal of Business Research, Elsevier, vol. 57(12), pages 1431-1437, December.
    3. repec:eco:journ1:2017-05-58 is not listed on IDEAS
    4. Theodoro D. Cocca, 2002. "Transaktionskostentheoretische Betrachtung des Anlageverhaltens im Online-Handel und deren empirische Evidenz," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 138(IV), pages 439-464, December.
    5. Brian Mantel & Timothy McHugh, 2001. "Competition and innovation in the consumer e-payments market? considering the demand, supply, and public policy issues," Occasional Paper; Emerging Payments EPS-2001-4, Federal Reserve Bank of Chicago.

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