Why Do Shoppers Use Cash? Evidence from Shopping Diary Data

Naoki Wakamori and Angelika Welte

Staff Working Papers from Bank of Canada

Abstract: Recent studies find that cash remains a dominant payment choice for small-value transactions despite the prevalence of alternative means of payment such as debit and credit cards. For policy makers an important question is whether consumers truly prefer using cash or merchants restrict card usage. Using the Bank of Canada’s 2009 Method of Payment Survey, we estimate a generalized multinomial logit model of payment choices to extract individual heterogeneity (demand-side factors) while controlling for merchants’ acceptance of cards (supply-side factors). Based on a counterfactual exercise where we assume universal card acceptance among merchants, we find that some consumers would decrease their cash usage but the magnitude of this decrease is small. Our results imply that the use of cash in small-value transactions is driven mainly by consumers’ preferences.

Keywords: Bank notes; Econometric and statistical methods; Financial services (search for similar items in EconPapers)
JEL-codes: C2 D1 G2 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2012
New Economics Papers: this item is included in nep-ban
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
https://www.bankofcanada.ca/wp-content/uploads/2012/07/wp2012-24.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:12-24

Access Statistics for this paper

More papers in Staff Working Papers from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC.
Bibliographic data for series maintained by ().