WHY IS CASH (STILL) SO ENTRENCHED? INSIGHTS FROM CANADIAN SHOPPING DIARIES

Carlos Arango · Dylan Hogg · Alyssa Lee

51 citations0/0 files storedContemporary Economic Policy

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Consumer Market Behavior and Pricing Monetary Policy and Economic Impact Digital Transformation in Financial Services

Abstract

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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References

2001Discrete Choice Methods with Simulation 2003Platform Competition in Two-Sided Markets 2006Two-sided markets: a progress report 2002Cooperation among Competitors: Some Economics of Payment Card Associations 1982The Real-Bills Doctrine versus the Quantity Theory: A Reconsideration 2008How people pay: Evidence from grocery store data 2009Financial Innovation and the Transactions Demand for Cash 2008Payment Card Rewards Programs and Consumer Payment Choice

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