Debit Card and Demand for Cash

31 Pages Posted: 16 Jun 2012 Last revised: 7 Nov 2013

See all articles by David Bounie

David Bounie

Telecom ParisTech

Abel Francois

Strasbourg University, LARGE; EM Strasbourg Business School; Telecom ParisTech

Patrick Waelbroeck

Telecom ParisTech

Date Written: November 5, 2013

Abstract

Despite the growing importance of the debit card in most developed countries, there are relatively few academic studies that analyze the impact of such evolution on the demand for cash. Beyond data availability, this research is complicated by the fact that the debit card provides two services for consumers, cash withdrawal and payment, that have contrasted effects on cash holdings and cash usage. Using micro-level data, we estimate the impacts of both services on the demand for cash by comparing the cash holdings and the cash usage of three populations, namely non-cardholders, ATM cardholders and debit cardholders. Controlling for various individual and network characteristics as well as a possible endogenous bias, we find that the negative effect of the payment service on the demand for cash dominates the positive effect of the cash withdrawal service resulting in an overall negative impact of the debit card on the demand for cash.

Keywords: Cash demand, Debit card, Endogenous ordinal probit

JEL Classification: E41, E58, D12

Suggested Citation

Bounie, David and Francois, Abel and Waelbroeck, Patrick, Debit Card and Demand for Cash (November 5, 2013). Available at SSRN: https://ssrn.com/abstract=2084641 or http://dx.doi.org/10.2139/ssrn.2084641

David Bounie (Contact Author)

Telecom ParisTech ( email )

46 rue Barrault
F-75634 Paris, Cedex 13
France

Abel Francois

Strasbourg University, LARGE ( email )

47 avenue de la foret Noire
Strasbourg, 67000
France

HOME PAGE: http://abelfrancois.wordpress.com/information/

EM Strasbourg Business School ( email )

PEGE
61 avenue de la ForĂȘt Noire
Strasbourg, 67000
France

HOME PAGE: http://abelfrancois.wordpress.com/information/

Telecom ParisTech

46, rue Barrault
Paris Cedex 13, F-75634
France

Patrick Waelbroeck

Telecom ParisTech ( email )

46 rue Barrault
F-75634 Paris, Cedex 13
France

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