Payment Choice and the Future of Currency: Insights from Two Billion Retail Transactions

50 Pages Posted: 5 Apr 2014 Last revised: 9 Apr 2014

See all articles by Zhu Wang

Zhu Wang

Federal Reserve Banks - Federal Reserve Bank of Richmond

Alexander L. Wolman

Federal Reserve Bank of Richmond

Date Written: April 4, 2014

Abstract

This paper uses transaction-level data from a large discount chain together with zip-code-level explanatory variables to learn about consumer payment choices across size of transaction, location, and time. With three years of data from thousands of stores across the country, we identify important economic and demographic effects; weekly, monthly, and seasonal cycles in payments, as well as time trends and significant state-level variation that is not accounted for by the explanatory variables. We use the estimated model to forecast how the mix of consumer payments will evolve and to forecast future demand for currency. Our estimates based on this large retailer, together with forecasts for the explanatory variables, lead to a benchmark prediction that the cash share of retail sales will decline by 2.54 percentage points per year over the next several years.

Keywords: Payment choice, Money demand, Consumer behavior

JEL Classification: E41, D12, G2

Suggested Citation

Wang, Zhu and Wolman, Alexander L., Payment Choice and the Future of Currency: Insights from Two Billion Retail Transactions (April 4, 2014). FRB Richmond Working Paper No. 14-09. Available at SSRN: https://ssrn.com/abstract=2420420 or http://dx.doi.org/10.2139/ssrn.2420420

Zhu Wang

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Alexander L. Wolman (Contact Author)

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
138
Abstract Views
746
rank
219,662
PlumX Metrics