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

  • Brian Mantel
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    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.

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    Paper provided by Federal Reserve Bank of Chicago in its series Occasional Paper; Emerging Payments with number EPS-2000-1.

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    Date of creation: 2000
    Date of revision:
    Handle: RePEc:fip:fedhop:eps-2000-1
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    1. 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.
    2. 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.
    3. John C. Hershey & Howard C. Kunreuther & Paul J. H. Schoemaker, 1982. "Sources of Bias in Assessment Procedures for Utility Functions," Management Science, INFORMS, vol. 28(8), pages 936-954, August.
    4. 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.
    5. Charles M. Kahn & William Roberds, 1999. "Real-time gross settlement and the costs of immediacy," Working Paper 98-21, Federal Reserve Bank of Atlanta.
    6. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
    7. Sujit Chakravorti, 2000. "Why has stored value not caught on?," Emerging Issues, Federal Reserve Bank of Chicago, issue May.
    8. Philip Bond & Robert Townsend, 1996. "Formal and informal financing in a Chicago neighborhood," Economic Perspectives, Federal Reserve Bank of Chicago, issue Jul, pages 3-27.
    9. Belk, Russell W, 1975. " Situational Variables and Consumer Behavior," Journal of Consumer Research, University of Chicago Press, vol. 2(3), pages 157-64, December.
    10. Lawrence J. Radecki, 1999. "Banks' payments-driven revenues," Economic Policy Review, Federal Reserve Bank of New York, issue Jul, pages 53-70.
    11. Freeman, Scott, 1996. "The Payments System, Liquidity, and Rediscounting," American Economic Review, American Economic Association, vol. 86(5), pages 1126-38, December.
    12. 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 216-34, May.
    13. 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.
    14. Celsi, Richard L & Olson, Jerry C, 1988. " The Role of Involvement in Attention and Comprehension Processes," Journal of Consumer Research, University of Chicago Press, vol. 15(2), pages 210-24, September.
    15. McFadden, Daniel, 1980. "Econometric Models for Probabilistic Choice among Products," The Journal of Business, University of Chicago Press, vol. 53(3), pages S13-29, July.
    16. Kirstin E. Wells, 1996. "Are checks overused?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 2-12.
    17. 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.
    18. Lawrence J. Radecki, 1999. "Banks' payments-driven revenues," Staff Reports 62, Federal Reserve Bank of New York.
    19. Theodore W. Schultz, 1962. "Reflections on Investment in Man," Journal of Political Economy, University of Chicago Press, vol. 70, pages 1.
    20. 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.
    21. Barbara A. Good, 1997. "Electronic money," Working Paper 9716, Federal Reserve Bank of Cleveland.
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