Payment Choice and the Future of Currency: Insights from Two Billion Retail Transactions

Zhu Wang and Alexander Wolman

No 14-9, Working Paper from Federal Reserve Bank of Richmond

Abstract: This paper uses transaction-level data from a large discount chain together with zip-code-level explanatory variables to learn about consumer payment choices across size of transaction, location, and time. With three years of data from thousands of stores across the country, we identify important economic and demographic effects; weekly, monthly, and seasonal cycles in payments, as well as time trends and significant state-level variation that is not accounted for by the explanatory variables. We use the estimated model to forecast how the mix of consumer payments will evolve and to forecast future demand for currency. Our estimates based on this large retailer, together with forecasts for the explanatory variables, lead to a benchmark prediction that the cash share of retail sales will decline by 2.54 percentage points per year over the next several years.

Keywords: Payment choice; Money demand; Consumer behavior (search for similar items in EconPapers)
JEL-codes: D12 E41 G2 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2014-04-14
New Economics Papers: this item is included in nep-for, nep-mac, nep-mkt and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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