Identity Theft and Consumer Payment Choice: Does Security Really Matter?

Abstract:     
Identity theft has become a major concern for financial institutions and consumers during the last years. How identity theft has affected consumer’s payment choice is still an open research question. Using a newly available nationally representative Survey from the U.S., we study how identity theft incidents have affected adoption and usage patterns of nine different payment instruments used for paying. We find that identity theft incidents increase the adoption of money orders, traveler’s checks, online bank bill payments (OBBP) and, in particular, prepaid cards. We also find that identity theft increases the use of cash and credit cards. These results are robust to different model specifications controlling for various socio-demographic characteristics and perceptions toward payment methods.

Number of Pages in PDF File: 63

Keywords: identity theft, payment choice, adoption, usage, consumers

JEL Classification: G20, D12, E41

working papers series