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Leonard Sabetti

28 October 2011
This paper uses discrete-choice models to quantify the role of consumer socio-economic characteristics, payment instrument attributes, and transaction features on the probability of using cash, debit card, or credit card at the point-of-sale. We use the Bank of Canada 2009 Method of Payment Survey, a two-part survey among adult Canadians containing a detailed questionnaire and a three-day shopping diary. We find that cash is still used intensively at low value transactions due to speed, merchant acceptance, and low costs. Debit and credit cards are used more frequently for higher transaction values where safety, record keeping, the ability to delay payment and credit card rewards gain prominence. We present estimates of the elasticity of using a credit card with respect to credit card rewards. Reward elasticities are a key element in understanding the impact of retail payment pricing regulation on consumer payment instrument usage and welfare.
JEL Code
E41 : Macroeconomics and Monetary Economics→Money and Interest Rates→Demand for Money
C35 : Mathematical and Quantitative Methods→Multiple or Simultaneous Equation Models, Multiple Variables→Discrete Regression and Qualitative Choice Models, Discrete Regressors, Proportions
C83 : Mathematical and Quantitative Methods→Data Collection and Data Estimation Methodology, Computer Programs→Survey Methods, Sampling Methods
Conference on the future of retail payments: opportunities and challenges