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Why Do Shoppers Use Cash? Evidence from Shopping Diary Data
Author(s) -
WAKAMORI NAOKI,
WELTE ANGELIKA
Publication year - 2017
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12379
Subject(s) - cash , payment , value (mathematics) , business , credit card , payment card , debit card , atm card , actuarial science , finance , computer science , machine learning
Recent studies find that cash remains the dominant payment choice for small‐value transactions despite the prevalence of alternative payment methods such as debit and credit cards. An important policy question is whether consumers truly prefer using cash or merchants restrict card usage. Using unique shopping diary data, we estimate a payment choice model with individual heterogeneity, controlling for merchants' acceptance of cards. Based on a policy simulation imposing universal card acceptance among merchants, we find that overall cash usage would decrease by only 8.0 percentage points, implying that cash usage in small‐value transactions is driven mainly by consumer preferences.