How Do Speed and Security Influence Consumers' Payment Behavior?

33 Pages Posted: 19 Oct 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

Multiple version iconThere are 3 versions of this paper

Date Written: 2015-02-05

Abstract

The Federal Reserve Financial Services (FRFS) strategic plan for 2012-2016 named improvements in the end-to-end speed and security of the payment system as two of its policy initiatives. End-to-end in this context means that for the first time end-users are explicitly included. Earlier versions of the strategy plan were circulated for public comment, and the feedback received by FRFS specifically identified a need for further research. This brief draws upon new data from the 2013 Survey of Consumer Payment Choice and employs econometric modeling and simulation to complement FRFS-commissioned market research on end users' preferences. The authors' approach relies on revealed preference to incorporate insight into consumers' actual behavior, not just their attitudes, and their models employ a two-stage technique, estimating, first, the influence of the simulated improvements in speed and in security on the adoption of the payment instruments considered, and, second, the influence on the choice of which of the adopted payment instruments to use. The final version of the strategic plan is currently under discussion by Federal Reserve policymakers, so all the policies and strategies discussed in this brief are preliminary.

JEL Classification: D12, D14, E58

Suggested Citation

Schuh, Scott and Stavins, Joanna, How Do Speed and Security Influence Consumers' Payment Behavior? (2015-02-05). Federal Reserve Bank of Boston Research Paper Series Current Policy Perspectives Paper No. 15-1. Available at SSRN: https://ssrn.com/abstract=2675624

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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