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Indonesian Household Payment Choice: A Nested Logit Analysis

Nur Annisa Hasniawati (), Eva R. Lase () and Akhis R. Hutabarat ()
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Nur Annisa Hasniawati: Department of Payment System Policy, Bank Indonesia
Eva R. Lase: Department of Payment System Policy, Bank Indonesia
Akhis R. Hutabarat: Department of Payment System Policy, Bank Indonesia

Journal of Central Banking Theory and Practice, 2020, vol. 9, issue special issue, 291-313

Abstract: We examine the preferences of respondents for six types of payment instruments, namely cash, debit and credit cards, card and server-based electronic money, and internet or mobile banking. By applying a nested logit model to 500 household data covering six provincial capitals in Indonesia, we find that the decision to choose payment instruments is made sequentially. Socio-economic characteristics, including education, age, income, and transaction objectives or functionality have a significant effect on the probability of using non-cash electronic payment instruments. We find a substitution pattern between payment instruments, not only between cash and non-cash instruments but also between non-cash instruments. In light of these findings, appropriate payment system policies are in order to hasten the use of non-cash payment.

Keywords: Payment Preferences; Payment Instruments; Substitution between Payment Instruments (search for similar items in EconPapers)
JEL-codes: D14 (search for similar items in EconPapers)
Date: 2020
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