How do you pay? The role of incentives at the point-of-sale

Arbeitspapier

This paper uses discrete-choice models to quantify the role of consumer socioeconomic characteristics, payment instrument attributes, and transaction features on the probability of using cash, debit card, or credit card at the point-of-sale. We use the Bank of Canada 2009 Method of Payment Survey, a two-part survey among adult Canadians containing a detailed questionnaire and a three-day shopping diary. We find that cash is still used intensively at low value transactions due to speed, merchant acceptance, and low costs. Debit and credit cards are used more frequently for higher transaction values where safety, record keeping, the ability to delay payment and credit card rewards gain prominence. We present estimates of the elasticity of using a credit card with respect to credit card rewards. Reward elasticities are a key element in understanding the impact of retail payment pricing regulation on consumer payment instrument usage and welfare.

Show object

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 1386

Classification and Topics

• Classification: Wirtschaft ; Demand for Money ; Multiple or Simultaneous Equation Models: Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions ; Survey Methods; Sampling Methods
• Subject: credit card rewards ; discrete-choice models ; Retail payments

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Arango, Carlos ; Huynh, Kim P. ; Sabetti, Leonard
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/153820