How Do Consumers Make Their Payment Choices?

37 Pages Posted: 4 Jul 2017

See all articles by Joanna Stavins

Joanna Stavins

Federal Reserve Bank of Boston

Date Written: May, 2017


Payment transformation has generated a shift from paper to cards and electronic payments in the United States, but there is also a large degree of heterogeneity among consumers in how they pay. We present factors affecting consumer payment behavior, show data on how consumers pay in the United States, and summarize existing literature on consumer payment choice. On the supply side, technology, regulation, and cost affect payment behavior. On the demand side, consumer demographics and income, consumer preferences, and consumer assessments of payment method attributes have all been found significant. We focus on price differentiation by payment method by merchants and the effect of such price incentives on payment method use, and on the effect of demographics and of perceptions of payment characteristics on consumer payment choice, emphasizing the effect of security. The studies mentioned here utilize a growing number of data sources, including several surveys and diaries on consumer behavior conducted in the United States and in other countries. We also identify gaps where more research is needed to understand consumer payment choices.

Keywords: consumer surveys, payment behavior, consumer payments

JEL Classification: D12, D14, E41

Suggested Citation

Stavins, Joanna, How Do Consumers Make Their Payment Choices? (May, 2017). Research Data Reports Paper No. 17-1, Available at SSRN:

Joanna Stavins (Contact Author)

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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