New Innovations in Payments
In: Innovation Policy and the Economy, Band 17, S. 27-48
ISSN: 1537-2618
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In: Innovation Policy and the Economy, Band 17, S. 27-48
ISSN: 1537-2618
In: Contemporary economic policy: a journal of Western Economic Association International, Band 34, Heft 4, S. 595-613
ISSN: 1465-7287
The Federal Reserve named improvements in the speed and security of the payment system as two of its policy initiatives for 2012–2016. Using new data from the 2013 Survey of Consumer Payment Choice (SCPC) and models from earlier research, we estimate how various aspects of speed and security influence consumers' decisions to adopt and use payment instruments. Some aspects of speed and security have a statistically significant influence on the adoption and use of selected payment instruments, but not as much as other characteristics of payment instruments. Using econometric models to simulate selected policies proposed by the Fed, we show that faster speed of payment deduction for Automatic Clearing House (ACH) transactions would slightly increase consumers' adoption of ACH‐based payment methods, while enhanced security of payment cards would marginally increase the use of credit and debit cards. However, neither improvement is likely to increase consumer welfare much because consumer demand for payments is very inelastic with respect to speed and security. Our analysis focuses exclusively on consumers' behavior and does not include potential benefits of improvements to the payment system that would directly benefit businesses or financial institutions. In addition, preventing security breaches may preserve public confidence in the payment system, benefitting consumers even if they do not change their payment behavior. (JEL D12, D14, E58)
In: Research Data Reports Paper No. 17-7
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In: Consumer Financial Protection Bureau Office of Research Working Paper No. 2017-03
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In: FRB of Boston Public Policy Discussion Paper No. 15-1
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In: Federal Reserve Bank of Boston Research Paper Series Current Policy Perspectives Paper No. 15-1
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In: ECB Working Paper No. 1660
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In: ECB Working Paper No. 1684
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In: NBER Working Paper No. w13532
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In: Research Data Reports Paper No. 18-1
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In: FRB of Boston Working Paper No. 17-7
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In: The Rand journal of economics, Band 47, Heft 2, S. 293-325
ISSN: 1756-2171
Motivated by recent policy intervention into payments markets, we develop and estimate a structural model of adoption and use of payment instruments by U.S. consumers. Our structural model differentiates between the adoption and use of payment instruments. We evaluate substitution among payment instruments and welfare implications. Cash is the most significant substitute to debit cards in retail settings, whereas checks are the most significant in bill‐pay settings. Furthermore, low income consumers lose proportionally more than high income consumers when debit cards become more expensive, whereas the reverse is true when credit cards do.
This paper presents results of the 2009 Survey of Consumer Payment Choice (SCPC), along with revised 2008 SCPC data. In 2009, the average U.S. consumer held 5.0 of the nine payment instruments available, including cash, and used 3.8 of them during a typical month. Between the 2008 and 2009 surveys, a period that includes the trough of the latest recession, consumers significantly increased their use of cash and close substitutes for cash, such as money orders and prepaid cards. At the same time, consumers reduced their use of credit cards and (to a lesser extent) debit cards, as well as payments made using a bank account number. Weaker economic conditions, new government regulations, and bank pricing of payment card services all likely contributed to the shift back toward cash. However, it is difficult to determine how much each of these factors contributed, and whether the shift is transitory or permanent, without more data and research on consumer payment choice. In 2009, one in three consumers had a prepaid card and nearly as many had a nonbank payment account online, while 3 percent made a mobile payment. By focusing on payments by consumers only, the SCPC complements the recent 2010 Federal Reserve Payment Study, which describes the entire noncash payments economy.
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