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The convenience of electronic payments and consumer cash demand

Author

Listed:
  • Brown, Martin
  • Hentschel, Nicole
  • Mettler, Hannes
  • Stix, Helmut

Abstract

How does the improved convenience of electronic payments affect consumer payment choice and cash demand? We study the staggered, quasi-random introduction of contactless debit cards by a retail bank. We use account-level data and compare transactions which are eligible for contactless authentication to transactions which are not. We identify a significant convenience effect on debit card use at the intensive margin. The convenience elasticity is strongest among younger clients. Treatment effects increase over time, coinciding with increasing merchant acceptance. The effect on cash demand is economically small and statistically insignificant. We also find no effect on consumer spending.

Suggested Citation

  • Brown, Martin & Hentschel, Nicole & Mettler, Hannes & Stix, Helmut, 2022. "The convenience of electronic payments and consumer cash demand," Journal of Monetary Economics, Elsevier, vol. 130(C), pages 86-102.
    • Handle: RePEc:eee:moneco:v:130:y:2022:i:c:p:86-102
    DOI: 10.1016/j.jmoneco.2022.06.001
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    More about this item

    Keywords

    Financial innovation; Cash management; 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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