Financial Innovation, Payment Choice and Cash Demand - Causal Evidence from the Staggered Introduction of Contactless Debit Cards

57 Pages Posted: 24 Apr 2020

See all articles by Martin Brown

Martin Brown

University of St. Gallen

Nicole Hentschel

University of St.Gallen

Hannes Mettler

University of St. Gallen

Helmut Stix

Oesterreichische Nationalbank - Economic Studies Division

Date Written: April 20, 2020

Abstract

We examine how an innovation in payment technology impacts on consumer payment choice and cash demand. We study the staggered introduction of contactless debit cards between 2016-2018. The timing of access to the contactless technology is quasi-random across clients, depending only on the expiry date of the existing debit card. Our analysis is based on administrative data for over 21’000 bank clients and follows a pre-analysis plan. Average treatment effects show that the receipt of a contactless card increases the use of debit cards especially for small-value payments. However, we find only a moderate average reduction in the cash share of payments and no reduction of average cash demand. Treatment effects on payment choice are strongest among consumers with an intermediate pre-treatment use of cash. Explorative analyses reveal that effects are largely driven by young consumers in urban locations.

Keywords: Financial innovation, cash, money demand, payment choice, pre-analysis plan

JEL Classification: E41, G20, O33, D14

Suggested Citation

Brown, Martin and Hentschel, Nicole and Mettler, Hannes and Stix, Helmut, Financial Innovation, Payment Choice and Cash Demand - Causal Evidence from the Staggered Introduction of Contactless Debit Cards (April 20, 2020). University of St.Gallen, School of Finance Research Paper No. 2020/02, Available at SSRN: https://ssrn.com/abstract=3582388 or http://dx.doi.org/10.2139/ssrn.3582388

Martin Brown (Contact Author)

University of St. Gallen ( email )

Unterer Graben 21
St. Gallen, CH-9000
Switzerland

Nicole Hentschel

University of St.Gallen ( email )

Unterer Graben 21
St.Gallen, 9000
Switzerland
+41 (0)71 224 70 34 (Phone)

HOME PAGE: http://www.sbf.unisg.ch/en

Hannes Mettler

University of St. Gallen ( email )

Unterer Graben 21
St.Gallen, 9000
Switzerland

Helmut Stix

Oesterreichische Nationalbank - Economic Studies Division ( email )

Otto-Wagner Platz 3
POB 61
Vienna 1011
Austria

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