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A game changer in payment habits: evidence from daily data during a pandemic

Guerino Ardizzi (), Andrea Nobili () and Giorgia Rocco
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Guerino Ardizzi: Bank of Italy

No 591, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We explore the relationship between cash and other payment instruments using the outbreak of the COVID-19 pandemic as a natural experiment exogenously affecting both the payment industry and consumers’ habits. We rely on Google search data, as well as on the official series of new cases of infection to measure the intensity of the pandemic, and apply local projection methods to assess the effects on payment habits. We find a large and persistent substitution effect from cash to card-based transactions, especially using contactless and e-commerce options. The fear of infection has led to a new implicit cost associated to each payment instrument, thus affecting payment choices from the demand-side and boosting consumption with non-cash transactions. Moreover, technical constraints on the cash cycle and the lockdown measures have increased the demand for cash for precautionary purposes. Policies aiming at accelerating the digital economy and the most innovative means of payment can potentially make economic activity more resilient to adverse shocks. At the same time, ensuring the adequate and efficient availability of cash remains essential from a social and economic perspective.

Keywords: COVID-19 pandemic; cash; payment habits; unconventional data (search for similar items in EconPapers)
JEL-codes: E41 E42 G2 O3 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-ban, nep-mac and nep-pay
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