Consumer payment choice: Merchant card acceptance versus pricing incentives

Arango, Carlos; Huynh, Kim P.; Sabetti, Leonard

doi:10.1016/j.jbankfin.2015.02.005

Cited by 112 publications

(93 citation statements)

References 32 publications

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“…Further, cash still constitutes a non-trivial value share of payments at about 20%. One of the reasons cited for the continual use of cash is that it is used frequently for small value transactions because of its speed, ease of use and wide acceptance; see Arango et al (2015) and Wakamori and Welte (2012), who confirmed this result for Canada. However, Arango et al (2012) discussed some innovations in the retail payment market that are designed to mimic these attractive features of cash.…”

Section: Introductionmentioning

confidence: 93%

Retail Payment Innovations and Cash usage: Accounting for Attrition by using Refreshment Samples

Chen

Felt

Huynh

2016

Journal of the Royal Statistical Society Series A: Statistics in Society

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. iii Terms of use: Documents in AbstractWe exploit the panel dimension of the Canadian Financial Monitor (CFM) data to estimate the impact of retail payment innovations on cash usage. We estimate a semiparametric panel data model that accounts for unobserved heterogeneity and allows for general forms of non-random attrition. We use annual data from the CFM on the methods of payment and cash usage for the period 2010-12. Estimates based on crosssectional methods find a large impact of retail payment on cash usage (around 10 percent). However, after correcting for attrition, we find that contactless credit cards and multiple stored-value cards (reloadable) have no significant impact on cash usage, while single-purpose stored-value cards reduce the usage of cash by 2 percent in terms of volume. These results point to the uneven pace of the diffusion of payment innovations, especially contactless credit.

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Section: Introductionmentioning

confidence: 93%

Retail Payment Innovations and Cash usage: Accounting for Attrition by using Refreshment Samples

Chen

Felt

Huynh

2016

Journal of the Royal Statistical Society Series A: Statistics in Society

Self Cite

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“…Our article is closely related to the work of Borzekowski, Kiser, and Ahmed () and Borzekowski and Kiser (), which use survey data to study adoption and use of debit. Arango, Huynh, and Sabetti () also study payment choice, in this case using diary data. Amromin and Chakravorti () study cash use across different countries.…”

Section: Policy Setting and Literature Reviewmentioning

confidence: 99%

Explaining adoption and use of payment instruments by US consumers

Koulayev¹,

Rysman

Schuh

et al. 2016

The RAND J of Economics

103

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Motivated by recent policy intervention into payments markets, we develop and estimate a structural model of adoption and use of payment instruments by U.S. consumers. Our structural model differentiates between the adoption and use of payment instruments.We evaluate substitution among payment instruments and welfare implications. Cash is the most significant substitute to debit cards in retail settings, whereas checks are the most significant in bill-pay settings. Furthermore, low income consumers lose proportionally more than high income consumers when debit cards become more expensive, whereas the reverse is true when credit cards do.

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“…See Arango, Huynh, and Sabetti () for an alternative way of thinking about consumers' “loyalty” to a payment method. …”

mentioning

confidence: 99%

“…In a multinomial discrete‐choice model of cash, debit and credit, Arango, Huynh, and Sabetti () look more closely at the substitution patterns between the three payment methods and find that credit card rewards mainly affect debit card usage, and their impact increases significantly with the transaction value. …”

mentioning

confidence: 99%

Why Is Cash (Still) So Entrenched? Insights From Canadian Shopping Diaries

Arango

Hogg

Lee

2014

Contemporary Economic Policy

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One similarity among many developed economies is the predominance of cash over electronic payments in terms of payment frequency, especially for the low-value transactions that are the bulk of retail payments. We use the Bank of Canada's 2009 Methods-of-Payment Survey, which collected information on consumers' payment choices through shopping diaries, to estimate a simple model of choice between cash and other payment methods. Results suggest that the main reasons cash is still a popular payment instrument in Canada, especially for low-value transactions, are its wide acceptance among merchants compared with other alternatives, speed and ease of use, and low marginal cost when on hand. (JEL E41, D12, L81)

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Consumer payment choice: Merchant card acceptance versus pricing incentives

Cited by 112 publications

References 32 publications

Retail Payment Innovations and Cash usage: Accounting for Attrition by using Refreshment Samples

Retail Payment Innovations and Cash usage: Accounting for Attrition by using Refreshment Samples

Explaining adoption and use of payment instruments by US consumers

Why Is Cash (Still) So Entrenched? Insights From Canadian Shopping Diaries

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