How Consumers Pay: Adoption and Use of Payments

35 Pages Posted: 14 Feb 2015

See all articles by Scott D. Schuh

Scott D. Schuh

Federal Reserve Bank of Boston - Research Department

Joanna Stavins

Federal Reserve Bank of Boston

Date Written: December 12, 2011

Abstract

Using data from a nationally representative survey on consumer payment behavior, we estimate Heckman two-stage regressions on the adoption and use of seven different payment instruments. We find that the characteristics of payments are important in determining consumer payment behavior, even when controlling for demographic and financial attributes: setup and record keeping are especially important in explaining adoption, while security is important in explaining which methods consumers use for transactions. For the first time, we estimate the number of payment methods adopted by consumers conditional on having access to a bank account, as the unbanked consumers’ payment choices are much more limited than those of consumers with bank accounts. This paper follows the analysis in Schuh and Stavins (2010), but with improved data, allowing us to estimate a better model of payment behavior. As in the previous study, cost is found to significantly affect payment use, indicating that the recent increase in the cost of debit cards issued by some banks may lead to a reduction in U.S. consumers’ reliance on debit cards for transactions.

JEL Classification: E41, D14, D12

Suggested Citation

Schuh, Scott and Stavins, Joanna, How Consumers Pay: Adoption and Use of Payments (December 12, 2011). FRB of Boston Working Paper No. 12-2. Available at SSRN: https://ssrn.com/abstract=2564179 or http://dx.doi.org/10.2139/ssrn.2564179

Scott Schuh (Contact Author)

Federal Reserve Bank of Boston - Research Department ( email )

600 Atlantic Ave.
Boston, MA 02210
United States
617-973-3941 (Phone)
617-619-7541 (Fax)

Joanna Stavins

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States
617-973-4217 (Phone)
617-973-4218 (Fax)

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