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Financial Innovation, Payment Choice and Cash Demand – Causal Evidence from the Staggered Introduction of Contactless Debit Cards

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We examine how an innovation in payment technology impacts on consumer payment choice and cash demand. We study the staggered introduction of contactless debit cards between 2016-2018. The timing of access to the contactless technology is quasi-random across clients, depending only on the expiry date of the existing debit card. Our analysis is based on administrative data for over 21’000 bank clients and follows a pre-analysis plan. Average treatment effects show that the receipt of a contactless card increases the use of debit cards especially for small-value payments. However, we find only a moderate average reduction in the cash share of payments and no reduction of average cash demand. Treatment effects on payment choice are strongest among consumers with an intermediate pre-treatment use of cash. Explorative analyses reveal that effects are largely driven by young consumers in urban locations.

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  • Martin Brown & Nicole Hentschel & Hannes Mettler & Helmut Stix, 2020. "Financial Innovation, Payment Choice and Cash Demand – Causal Evidence from the Staggered Introduction of Contactless Debit Cards," Working Papers 230, Oesterreichische Nationalbank (Austrian Central Bank).
  • Handle: RePEc:onb:oenbwp:230
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Will coronavirus accelerate the move towards a cashless economy?
      by bbatiz in The Cashless Society on 2020-09-08 16:54:28

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    4. Till Ebner & Thomas Nellen & Jörn Tenhofen, 2021. "The rise of digital watchers," Working Papers 2021-01, Swiss National Bank.
    5. Marie-Hélène Felt, 2020. "Losing Contact: The Impact of Contactless Payments on Cash Usage," Staff Working Papers 20-56, Bank of Canada.

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    More about this item

    Keywords

    Financial innovation; cash; money demand; payment choice; pre-analysis plan;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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