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Financial Innovation, Payment Choice and Cash Demand – Causal Evidence from the Staggered Introduction of Contactless Debit Cards (Martin Brown,Nicole Hentschel, Hannes Mettler, Helmut Stix)

Martin Brown, Nicole Hentschel, Hannes Mettler and Helmut Stix
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Hannes Mettler: University of St. Gallen

Working Papers from Oesterreichische Nationalbank (Austrian Central Bank)

Abstract: We examine how an innovation in payment technology impacts on consumer payment choice and cash demand. We study the staggered introduction of contactless debit cards between 2016-2018. The timing of access to the contactless technology is quasi-random across clients, depending only on the expiry date of the existing debit card. Our analysis is based on administrative data for over 21’000 bank clients and follows a pre-analysis plan. Average treatment effects show that the receipt of a contactless card increases the use of debit cards especially for small-value payments. However, we find only a moderate average reduction in the cash share of payments and no reduction of average cash demand. Treatment effects on payment choice are strongest among consumers with an intermediate pre-treatment use of cash. Explorative analyses reveal that effects are largely driven by young consumers in urban locations.

Keywords: Financial innovation; cash; money demand; payment choice; pre-analysis plan (search for similar items in EconPapers)
JEL-codes: D14 E41 G20 O33 (search for similar items in EconPapers)
Pages: 63
Date: 2020-05-08
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