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

50 Pages Posted: 16 Feb 2012 Last revised: 28 Apr 2014

Charles M. Kahn

University of Illinois, Urbana-Champaign; Feseral Reserve Bank of Saint Louis; Bank of Canada

José Manuel Liñares-Zegarra

University of Essex - Essex Business School

Date Written: October 17, 2013

Abstract

Security is a critical aspect of electronic payment systems. In recent years, the phenomenon of identity theft has gained widespread media coverage and has grown to be a major concern for payment providers and consumers alike. 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 the effect of identity theft incidents on adoption and usage patterns for nine different payment instruments. Our results suggest that specific identity theft incidents alter the probability of adopting cash, money orders, credit cards, stored value cards, bank account number payments and online banking bill payment, after controlling for socio-demographic and payment characteristics. As for payment usage, we observe a positive and statistically significant effect of certain types of identity theft incidents on cash, money orders and credit cards. However, we also find that specific identity theft incidents could decrease the usage of checks and online banking bill payment. These results are robust across different types of transaction after controlling for various socio-demographic characteristics and perceptions toward payment methods.

Keywords: identity theft, payment choice, Heckman selection model

JEL Classification: G20, D12, E41

Suggested Citation

Kahn, Charles M. and Liñares-Zegarra, José Manuel, Identity Theft and Consumer Payment Choice: Does Security Really Matter? (October 17, 2013). Available at SSRN: https://ssrn.com/abstract=2005694 or http://dx.doi.org/10.2139/ssrn.2005694

Charles M. Kahn

University of Illinois, Urbana-Champaign ( email )

Department of Finance
340 Wohlers Hall
Champaign, IL 61820
United States

HOME PAGE: http://kahnfrance.com/cmk/

Feseral Reserve Bank of Saint Louis

411 Locust St
Saint Louis, MO 63011
United States

Bank of Canada

234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada

Jose Manuel Linares-Zegarra (Contact Author)

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

HOME PAGE: http://www.essex.ac.uk/ebs/staff/profile.aspx?ID=4474

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