How effective are rewards programs in promoting payment card usage? Empirical evidence

Abstract

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. The aim of the conference was to better understand current developments in retail payment markets and to identify possible future trends, by bringing together policy conduct, research activities and market practice. The conference was organised around two major topics: first, the economic and regulatory implications of a more integrated retail payments market and, second, the strands of innovation and modernisation in the retail payments business. To make innovations successful, expectations and requirements of retail payment users have to be taken seriously. The conference has shown that these expectations and requirements are strongly influenced by the growing demand for alternative banking solutions, the increasing international mobility of individuals and companies, a loss of trust in the banking industry and major social trends such as the ageing population in developed countries. There are signs that customers see a need for more innovative payment solutions. Overall, the conference led to valuable findings which will further stimulate our efforts to foster the economic underpinnings of innovation and integration in retail banking and payments. Terms of use: Documents inWe would like to take this opportunity to thank all participants in the conference. In particular, we would like to acknowledge the valuable contributions of all presenters, discussants, session chairs and panellists, whose names can be found in the enclosed conference programme. Their main statements are summarised in the ECB-DNB official conference summary. Twelve papers related to the conference have been accepted for publication in this special series of the ECB Working Papers Series.Behind the scenes, a number of colleagues from the ECB and DNB contributed to both the organisation of the conference and the preparation of this conference report.

Why Do People Use Debit Cards: Evidence From Checking Accounts

“…Finally, another important determinant in debit card use, noted by Schuh and Stavins (2010), Bolt, Jonker, and Von Renselaar (2010), Rochet and Wright (2010), Simon, Smith, and West (2010), Ching and Hayashi (2010), and Carbo‐Valverde and Linares‐Zegarra (2011) is cost (in the form of rewards or surcharges); however, the checking account records do not show any variation in this dimension as they are derived from the same depository institution.…”

“…Spanish consumers agreed with the statement “Payment cards offer control of domestic spending.” at a rate of only 1.53 on a 5‐point Likert (Carbo‐Valverde and Linares‐Zegarra 2011). This is consistent with other survey evidence that only a minority of people see debit as a tool of spending restraint.…”

Network Effects at Retail Payments Market: Evidence From Russian Individuals

“…This research aims to contribute to the rising literature on the determinants of cashless payments instrument holding and usage (Arango-Arango, Bouhdaoui, Bounie, Eschelbach, & Hernandez, 2018;Bagnall et al, 2014;Bounie & Francois, 2006;Bounie, François, & Hove, 2016;Carbó-Valverde & Liñares-Zegarra, 2011;Gresvik, 2008). Most of the studies do not investigate the presence of network externalities for the customers empirically and those that do fail to distinguish between direct and indirect network externalities.…”

“…Therefore, the more merchants accept cards, the higher is the cardholders demand for using payment cards Some loyalty programs are conditional on the type of merchants and particular merchant brands. For instance, some banks provide higher cashback for some merchant categories or assign more bonuses as a result of a transaction at the partnered merchants' locations (Bolton, Kannan, & Bramlett, 2000;Carbó-Valverde & Liñares-Zegarra, 2011;Ching & Hayashi, 2010). The probability that a particular store, where an individual uses payment card, is a participant of some kind of banking loyalty program is higher when more stores accept payment cards.…”

“…This vector of controls consists of three dummies: participation in the loyalty program, credit card and the absence of fees for a payment card dummy. Loyalty programs provide additional motivation for using payment cards in order to be reimbursed in bonuses or cashback (Carbó-Valverde & Liñares-Zegarra, 2011;Ching & Hayashi, 2010;Krivosheya & Korolev, 2016). Withdrawals on credit cards are charged additional fees, which make it harder to use cash for a credit card holder (Krivosheya & Korolev, 2016;Rochet & Wright, 2010;Wang, 2008).…”