Cashless payments and consumer spending

Martin Brown, Yves Nacht, Thomas Nellen and Helmut Stix

No 2023-06, Working Papers from Swiss National Bank

Abstract: We examine how payment choice affects discretionary spending for a representative sample of consumers. Our analysis is motivated by a model of intertemporal choice in which intramonth liquidity constraints are endogenously determined by payment choice and cash management. In the model, present-biased consumers overspend if they choose to pay by card, as their spending is not limited by the amount of cash at hand. Our empirical analysis is based on matched payment diary, payment methods and behavioral survey data. We find that present-biased consumers spend more, the more often they use cashless payment instruments. The effect of cashless payments on spending is strong both for low- and high-income consumers but not among young consumers. We find no robust evidence that consumers choose cash payments to self-constrain their spending.

Keywords: Digital payments; Cash management; Payment choice; Present bias; Intertemporal choice; Preanalysis plan (search for similar items in EconPapers)
JEL-codes: D14 E41 G20 O33 (search for similar items in EconPapers)
Pages: 80 pages
Date: 2023
New Economics Papers: this item is included in nep-dcm and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:snb:snbwpa:2023-06

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