Behavioral drivers of cashless payments in Africa

Bernardo Batiz-Lazo, J Carles Maixe-Altes and David Peon

MPRA Paper from University Library of Munich, Germany

Abstract: We explore the potential of different behavioral drivers for people to use cash when presented with digital payment alternatives in retail transactions. Behavioral finance traits in our study include the otherwise neglected emotional drivers. We conducted an online survey targeting university educated adults in sub-Saharan African countries, a continent characterized by lower levels of banking penetration, intensive use of cash, and increased popularity of mobile money accounts to reduce financial exclusion. We obtain robust evidence that the affect heuristic is the only relevant behavioral trait determining the use of cash and of payments with credit cards, while there is no evidence of behavioral drivers influencing the overall decision to use of electronic payments. However, in specific payment contexts cognitive traits, such as mental accounting, fungibility bias, and habit, do mediate in determining the choice of payment method. We found robust evidence that a higher value of our personal income proxy is associated with a reduction in the intention to use electronic payments. All results are robust to alternative econometric specifications: multinomial logistic, ordered logistic, and logit regressions. Our research provides a clear policy message, namely for authorities to promote a variety of payment alternatives, including cash, and ensure they are available in retail transactions.

Keywords: FinTech; Cash; Digital Payments; Behavioral Finance (Affect Heuristic); Africa (Ghana; Kenya; Nigeria; South Africa). (search for similar items in EconPapers)
JEL-codes: E4 E5 G1 G2 L8 O3 (search for similar items in EconPapers)
Date: 2023-07
New Economics Papers: this item is included in nep-afr, nep-ban, nep-fdg, nep-fle, nep-mon and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:117984

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