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How Do Debit Cards Affect Cash Demand? Survey Data Evidence



This paper analyzes how EFT-POS payments and ATM withdrawals affect purse cash demand. In particular, survey data about Austrian individuals are employed to estimate a cash demand equation which takes account of sample selection effects. The results reveal that purse cash demand is significantly affected by debit card usage and that there are significant differences in cash demand for individuals with different debit card usage frequencies. For example, the point estimates imply that individuals who pay frequently with their debit card hold about 20% less purse cash than all others while frequent ATM withdrawals are associated with about 18% less purse cash demand. Due to the relative small share of frequent users, currently, aggregate purse cash demand is not very strongly affected by EFT-POS payments. However, if usage behavior shifts towards higher usage frequencies, then the findings of this study suggest that purse cash demand will decrease substantially.

Suggested Citation

  • Helmut Stix, 2003. "How Do Debit Cards Affect Cash Demand? Survey Data Evidence," Working Papers 82, Oesterreichische Nationalbank (Austrian Central Bank).
  • Handle: RePEc:onb:oenbwp:82

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    References listed on IDEAS

    1. Mathias Drehmann & Charles Goodhart & Malte Krueger, 2002. "The challenges facing currency usage: will the traditional transaction medium be able to resist competition from the new technologies?," Economic Policy, CEPR;CES;MSH, vol. 17(34), pages 193-228, April.
    2. 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.
    3. Sheri M. Markose & Yiing Jia Loke, 2003. "Network Effects On Cash-Card Substitution In Transactions And Low Interest Rate Regimes," Economic Journal, Royal Economic Society, vol. 113(487), pages 456-476, April.
    4. Brian M. Doyle, 2000. ""Here, dollars, dollars ..."estimating currency demand and worldwide currency substitution," International Finance Discussion Papers 657, Board of Governors of the Federal Reserve System (U.S.).
    5. 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 604-623, May.
    6. Laura Rinaldi, "undated". "Payment Cards and Money Demand in Belgium," International Economics Working Papers Series ces0116, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, International Economics.
    7. Paunonen, Heli & Jyrkönen, Hanna, 2002. "Cash usage in Finland : How much can be explained?," Research Discussion Papers 10/2002, Bank of Finland.
    8. Jussi Snellman & Jukka Vesala & David Humphrey, 2001. "Substitution of Noncash Payment Instruments for Cash in Europe," Journal of Financial Services Research, Springer;Western Finance Association, vol. 19(2), pages 131-145, April.
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    More about this item


    Cash Demand; Payment Cards; Cash Substitution;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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