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Losing Contact: The Impact of Contactless Payments on Cash Usage

Marie-Helene Felt

Staff Working Papers from Bank of Canada

Abstract: I investigate the impact of contactless credit cards (CTCs) on cash use in Canada, using panel data between 2010 and 2017. I show that ignoring unobserved heterogeneity would lead to overstating the impact of CTCs on cash usage in a linear model. Using finite mixture modelling, I provide evidence of the differential impacts of CTCs on the extensive versus intensive margins of cash usage. I use a two-part model, with an exclusion restriction for better identification, to model both margins separately. I obtain that CTC use negatively influences the intensive margin of cash usage but not its extensive margin. There is no clear evidence of an S-curve pattern in the impact of CTCs on cash usage over the sample period.

Keywords: Bank notes; Digital currencies and fintech; Econometric and statistical methods; Financial services (search for similar items in EconPapers)
JEL-codes: C33 D12 E41 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2020-12
New Economics Papers: this item is included in nep-mac and nep-pay
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