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Title:How do you pay? The role of incentives at the point-of-sale PDF Logo
Authors:Arango, Carlos
Huynh, Kim P.
Sabetti, Leonard
Issue Date:2011
Series/Report no.:Bank of Canada Working Paper 2011,23
Abstract:This paper uses discrete-choice models to quantify the role of consumer socioeconomic characteristics, payment instrument attributes, and transaction features on the probability of using cash, debit card, or credit card at the point-of-sale. We use the Bank of Canada 2009 Method of Payment Survey, a two-part survey among adult Canadians containing a detailed questionnaire and a three-day shopping diary. We find that cash is still used intensively at low value transactions due to speed, merchant acceptance, and low costs. Debit and credit cards are used more frequently for higher transaction values where safety, record keeping, the ability to delay payment and credit card rewards gain prominence. We present estimates of the elasticity of using a credit card with respect to credit card rewards. Reward elasticities are a key element in understanding the impact of retail payment pricing regulation on consumer payment instrument usage and welfare.
Subjects:Bank notes
Econometric and statistical methods
Financial services
JEL:C35
C83
Document Type:Working Paper
Appears in Collections:Bank of Canada Working Papers

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