Consumers’ perceived risk and hold and use of payment instruments

Abstract

ACL-2International audienceABSTRACTConsumer decisions regarding retail payment instruments entail private and social costs. Due to these social costs, policymakers are increasingly trying to understand the determinants of consumer payment choices as documented by the European Central Bank?s regular publications. This article contributes to this understanding by investigating the role of perceived risk. Based on an original survey of French consumers, we measure the effects of perceived risk on the decisions to hold and use the main retail payment instruments: cash, card and cheque. We point to the sequential dependence of the decisions to hold and use a payment instrument, and study jointly both decisions. The bivariate analysis based on risk factors shows that unavailability risk and time risk have the greatest transverse influence on holding and using payment instruments. Our results, robust to controlling for consumer characteristics, confirm their propensity for a quick-to-use and constantly available payment instrument. We discuss the relevance of our results for policy making purposes

A transaction cost explanation of the card-or-cash decision among Vietnamese debit card holders

“…However, among these factors, only environmental uncertainty negatively affects debit card holders' willingness to use the card by raising the costs for adaptation. This finding is consistent with the proposition of the transaction cost economics theory and further supports Karoubi et al (2015), who affirmed that both unavailability risk (i.e. difficulties in making transactions in the absence of a payment instrument) and unacceptance risk (due to cases when the transaction cannot be processed since the payment instrument is not accepted at points of purchase or due to technical problems) negatively influence the intention of holding and using the payment instrument.…”

“…Moreover, in order to use money-transfer services offered by banks, debit card holders need to deposit an amount of money in the debit account, and these assets cannot be withdrawn freely if the debit card holders fail to comply with some specific procedures regulated by banks. As a result, while attracted by many benefits of debit card usage, the debit card holders face many uncertainties such as loss risk, theft risk, unavailability risk, fraud risk, unacceptance risk and performance risk (Cheng et al , 2011; Karoubi et al , 2015). These risks or uncertainties result from either the difficulties in administering the banks' performance or disturbances during the time using debit cards, and, in turn, increase transaction costs.…”

“…In order to use debit card services offered by banks, cardholders need to dedicate a specific amount of money to their bank accounts, and this asset cannot be used or even withdrawn if the cardholders do not comply with special regulations and procedures required by banks. As a result, debit card holders face a lot of uncertainty such as loss risk, theft risk, unavailability risk, fraud risk, unacceptance risk and performance risk (Cheng et al , 2011; Karoubi et al , 2015), which result from either the difficulties in administering the banks' performance or disturbances during the time using debit cards. These uncertainties, in turn, increase transaction costs associated with debit card usage.…”

Online Payment and Consumers’ Attitude towards Risk reduction strategies in a cash based economy

“…Consumers use the internet to search for product or price information or general information, social media engagement etc. The adoption of technology for payment online in developing countries is still low hence, even when it is available, consumers are given options to choose which payment instrument they feel more comfortable with, and consider less risky to use (Karoubi, Chenavaz & Paraschiv, 2016). In Nigeria, the option of paying cash after shopping online is provided also.…”

“…The type of demographic characteristics that exist in developing nation's e-commerce industry fuels perceievd risk. It affects the growth of online shopping and limits the e-payment system (Karoubi et al, 2016;Hamid & Cheng 2013). Although, Schuh and Stavins (2010) believes that payment characteristics are more significant in explaining consumer payment use, they noted that unbanked consumers depend heavily on cash transactions as against the consumers with bank accounts.…”