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Consumer awareness and the use of payment media: evidence from young Finnish consumers

In the market for payment media, some consumers use only one medium when paying for their point-of-sale transactions, while others use many. This pattern reflects the diffusion of new payment media, because a payment method innovation is typically first used simultaneously with the established methods. We study the use of multiple payment media by employing data on young Finnish consumers. We find that the use of multiple payment media is directly related to consumer awareness and that not controlling for the endogeneity of awareness can bias its effect downwards. These results suggest that increasing consumer awareness may have been underlying the rise of debit card use around the world. It could also speed up the adoption of new means of payment, such electronic money and mobile payments. To the extent that antitrust concerns in the market for payment media stem from the lack of information, improving consumer awareness could be a remedy.

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/0802netti.pdf
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Paper provided by Bank of Finland in its series Research Discussion Papers with number 2/2008.

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Length: 34 pages
Date of creation: 27 Feb 2008
Date of revision:
Handle: RePEc:hhs:bofrdp:2008_002
Contact details of provider: Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/

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  1. Luigi Guiso & Tullio Jappelli, 2003. "Awareness and Stock Market Participation," CSEF Working Papers 110, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Jun 2004.
  2. Elizabeth Klee, 2006. "Families' use of payment instruments during a decade of change in the U.S. payment system," Finance and Economics Discussion Series 2006-01, Board of Governors of the Federal Reserve System (U.S.).
  3. Brian Mantel, 2000. "Why do consumers pay bills electronically? an empirical analysis," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, pages 32-48.
  4. Ron Borzekowski & Elizabeth K. Kiser, 2006. "The choice at the checkout: quantifying demand across payment instruments," Finance and Economics Discussion Series 2006-17, Board of Governors of the Federal Reserve System (U.S.).
  5. Ron Borzekowski & K. Kiser Elizabeth & Ahmed Shaista, 2008. "Consumers' Use of Debit Cards: Patterns, Preferences, and Price Response," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(1), pages 149-172, 02.
  6. Orazio P. Attanasio & Luigi Guiso & Tullio Jappelli, 2002. "The Demand for Money, Financial Innovation, and the Welfare Cost of Inflation: An Analysis with Household Data," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 317-351, April.
  7. W. Scott Frame & Lawrence J. White, 2004. "Empirical Studies of Financial Innovation: Lots of Talk, Little Action?," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 116-144, March.
  8. Hunt Robert M., 2003. "An Introduction to the Economics of Payment Card Networks," Review of Network Economics, De Gruyter, vol. 2(2), pages 1-17, June.
  9. Frank Windmeijer & Joao Santos Silva, 1996. "Endogeneity in count data models; an application to demand for health care," IFS Working Papers W96/15, Institute for Fiscal Studies.
  10. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  11. Marc Rysman, 2007. "AN EMPIRICAL ANALYSIS OF PAYMENT CARD USAGE -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 55(1), pages 1-36, 03.
  12. Ausubel, Lawrence M, 1991. "The Failure of Competition in the Credit Card Market," American Economic Review, American Economic Association, vol. 81(1), pages 50-81, March.
  13. Helmut Stix, 2004. "How Do Debit Cards Affect Cash Demand? Survey Data Evidence," Empirica, Springer, vol. 31(2), pages 93-115, June.
  14. David Humphrey & Moshe Kim & Bent Vale, 1998. "Realizing the gains from electronic payments: costs, pricing, and payment choice," Proceedings 586, Federal Reserve Bank of Chicago.
  15. Lusardi, Annamaria & Mitchell, Olivia S., 2007. "Financial literacy and retirement preparedness: Evidence and implications for financial education programs," CFS Working Paper Series 2007/15, Center for Financial Studies (CFS).
  16. repec:rje:randje:v:37:y:2006:3:p:645-667 is not listed on IDEAS
  17. Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
  18. Hyytinen, Ari & Takalo, Tuomas, 2004. "Multihoming in the Market for Payment Media: Evidence from Young Finnish Consumers," Discussion Papers 893, The Research Institute of the Finnish Economy.
  19. Frank Windmeijer, 2002. "ExpEnd, A Gauss programme for non-linear GMM estimation of exponential models with endogenous regressors for cross section and panel data," CeMMAP working papers CWP14/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  20. Humphrey, David B., 2004. "Replacement of cash by cards in US consumer payments," Journal of Economics and Business, Elsevier, vol. 56(3), pages 211-225.
  21. Ackerberg, Daniel A, 2001. "Empirically Distinguishing Informative and Prestige Effects of Advertising," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 316-33, Summer.
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