Less cash on the counter: Forecasting Finnish payment preferences
Finnish payment methods have changed rapidly as payment cards have gained increasing popularity and have, to an extent, replaced cash. This article examines this phenomenon and the trends in cash and electronic payment methods in Finland. It starts with an introduction to the statistical data on different payment methods used at points of sale and their electronification, after which learning curve and dynamic regression models are employed to analyse changes in the share of cash payments. Finally, forecasts are presented for the future path of the cash-share. The data indicate that the use of cards, especially debit cards, has increased substantially. For example, in 1984 some 80% of total purchases (in value terms) were made with cash, whereas by 2002 the corresponding figure had dropped below 50%. Estimation results suggest that learning curve models are not suitable for explaining electronification of payment methods in Finland – at least at this stage – whereas the error correction model and its special-case partial adjustment model, coupled with independent explanatory variables, seem to do a better job. A forecast based on the latter indicates that electronification will continue in future and that by 2010 the cash-share of total value of point-of-sale payments will fall to less than 30%.
|Date of creation:||13 Oct 2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.suomenpankki.fi/en/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Snellman, Jussi & Vesala, Jukka, 1999. "Forecasting the Electronification of Payments with Learning Curves: The Case of Finland," Research Discussion Papers 8/1999, Bank of Finland.
- 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.
- Sheri M. Markose & Yiing Jia Loke, 2003.
"Network Effects On Cash-Card Substitution In Transactions And Low Interest Rate Regimes,"
Royal Economic Society, vol. 113(487), pages 456-476, 04.
- Sheri M. Markose & Yiing Jia Loke, 2000. "Network effects on Cash-Card Substitution in Transactions and Low Interest Rate Regimes," Economics Discussion Papers 507, University of Essex, Department of Economics.
- Laura Rinaldi, . "Payment Cards and Money Demand in Belgium," International Economics Working Papers Series ces0116, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, International Economics.
- Humphrey, David & Kaloudis, Aris & Owre, Grete, 2004. "The future of cash: falling legal use and implications for government policy," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 14(3), pages 221-233, July.
- Shy, Oz & Tarkka, Juha, 1998.
"The Market for Electronic Cash Cards,"
Research Discussion Papers
21/1998, Bank of Finland.
- John V. Duca & William C. Whitesell, 1991.
"Credit cards and money demand: a cross-sectional study,"
9112, Federal Reserve Bank of Dallas.
- Duca, John V & Whitesell, William C, 1995. "Credit Cards and Money Demand: A Cross-sectional Study," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(2), pages 604-23, May.
- Snellman, Jussi & Vesala, Jukka & Humphrey, David, 2000. "Substitution of noncash payment instruments for cash in Europe," Research Discussion Papers 1/2000, Bank of Finland.
When requesting a correction, please mention this item's handle: RePEc:hhs:bofrdp:2004_027. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Minna Nyman)
If references are entirely missing, you can add them using this form.