Financial Innovation, Payment Choice and Cash Demand – Causal Evidence from the Staggered Introduction of Contactless Debit Cards
Series
School of Finance Working Paper Series
Type
working paper
Date Issued
2020-04-20
Author(s)
Abstract
We examine how an innovation in payment technology impacts on consumer payment choice and cash demand. We study the staggered introduction of contactless debit cards between 2016-2018 by a mid-sized retail bank. The timing of access to the contactless payment technology is quasi-random across clients, depending only on the expiry date of the pre-existing debit card. Our analysis is based on account-level data for a random sample of 30’000 bank clients and follows a pre-analysis plan. Average treatment effect estimates reveal that access to the contactless payment technology sizably increases the use of debit cards for small-value payments. However, relative to total consumer spending this increase in debit card payments is negligible. As a consequence, the average treatment effect on the cash share of payments and cash demand is economically small and statistically insignificant. Our analysis documents important heterogenous treatment effects on payment choice: Pre-treatment cash-only consumers react the least to the payment innovation. Explorative analyses reveal that young, urban consumers display the strongest change in payment choice. They also document no treatment effect on total consumer spending.
Language
English
Keywords
Financial innovation
cash
money demand
payment choice
pre-analysis plan
HSG Classification
contribution to scientific community
HSG Profile Area
SOF - System-wide Risk in the Financial System
Publisher
SoF-HSG
Publisher place
St.Gallen
Volume
2020/02
Number
02
Pages
57
Subject(s)
Contact Email Address
martin.brown@unisg.ch
Eprints ID
260102
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open.access
Name
20_02_Brown et al_Financial Innovation Payment Choice and Cash Demand - Causal Evidence from the Staggered Introduction of Contactless Debit Cards_4-2021.pdf
Size
813.88 KB
Format
Adobe PDF
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