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Why Is Cash (Still) So Entrenched? Insights From Canadian Shopping Diaries

Author

Listed:
  • Carlos A. Arango
  • Dylan Hogg
  • Alyssa Lee

Abstract

type="main" xml:id="coep12066-abs-0001"> One similarity among many developed economies is the predominance of cash over electronic payments in terms of payment frequency, especially for the low-value transactions that are the bulk of retail payments. We use the Bank of Canada's 2009 Methods-of-Payment Survey, which collected information on consumers' payment choices through shopping diaries, to estimate a simple model of choice between cash and other payment methods. Results suggest that the main reasons cash is still a popular payment instrument in Canada, especially for low-value transactions, are its wide acceptance among merchants compared with other alternatives, speed and ease of use, and low marginal cost when on hand. ( JEL E41, D12, L81)

Suggested Citation

  • Carlos A. Arango & Dylan Hogg & Alyssa Lee, 2015. "Why Is Cash (Still) So Entrenched? Insights From Canadian Shopping Diaries," Contemporary Economic Policy, Western Economic Association International, vol. 33(1), pages 141-158, January.
    • Handle: RePEc:bla:coecpo:v:33:y:2015:i:1:p:141-158
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    File URL: http://hdl.handle.net/10.1111/coep.2015.33.issue-1
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    Citations

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    Cited by:

    1. Carlos Arango & Yassine Bouhdaoui & David Bounie & Martina Eschelbach & Lola Hernández, 2013. "Cash Management and Payment Choices: A Simulation Model with International Comparisons," Staff Working Papers 13-53, Bank of Canada.
    2. Naoki Wakamori & Angelika Welte, 2017. "Why Do Shoppers Use Cash? Evidence from Shopping Diary Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(1), pages 115-169, February.
    3. Gómez González, José Eduardo & Jaramillo Echeverri y, Juliana & Meisel Roca, Adolfo, 2016. "El uso de efectivo y las tendencias de los pagos con tarjetas de débito y crédito en Colombia [Cash usage and trends in credit and debit card payments in Colombia]," MPRA Paper 78005, University Library of Munich, Germany, revised 15 Sep 2016.
    4. Geneviève Vallée, 2018. "How Long Does It Take You to Pay? A Duration Study of Canadian Retail Transaction Payment Times," Staff Working Papers 18-46, Bank of Canada.
    5. Tamás Briglevics & Scott Schuh, 2020. "This Is What's in Your Wallet...and Here's How You Use It," Working Papers 20-04, Department of Economics, West Virginia University.
    6. Egor Krivosheya & Polina Belyakova, 2019. "Financial innovations role in consumer behavior at Russian retail payments market," Proceedings of Economics and Finance Conferences 9511955, International Institute of Social and Economic Sciences.
    7. David, Bounie & Abel, François & Patrick, Waelbroeck, 2016. "Debit card and demand for cash," Journal of Banking & Finance, Elsevier, vol. 73(C), pages 55-66.
    8. Alvarez, Fernando & Lippi, Francesco, 2017. "Cash burns: An inventory model with a cash-credit choice," Journal of Monetary Economics, Elsevier, vol. 90(C), pages 99-112.
    9. Carlos Arango & Yassine Bouhdaoui & David Bounie & Martina Eschelbach & Lola Hernández, 2013. "Cash Management and Payment Choices: A Simulation Model with International Comparisons," Staff Working Papers 13-53, Bank of Canada.
    10. Fernando Alvarez & David Argente, 2022. "On the Effects of the Availability of Means of Payments: The Case of Uber," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 137(3), pages 1737-1789.
    11. Alberto Di Iorio & Giorgia Rocco, 2022. "Easier said than done: why Italians pay in cash while preferring cashless," Questioni di Economia e Finanza (Occasional Papers) 731, Bank of Italy, Economic Research and International Relations Area.
    12. repec:zbw:bofrdp:urn:nbn:fi:bof-201511251450 is not listed on IDEAS
    13. José Eduardo Gómez-González & Juliana Jaramillo-Echeverri & Adolfo Meisel-Roca, 2016. "El Uso de Efectivo y Tarjetas Débito y Crédito en Colombia," Borradores de Economia 950, Banco de la Republica de Colombia.
    14. Arango-Arango, Carlos A. & Suárez-Ariza, Nicolás, 2020. "Digital payments adoption and the demand for cash: New international evidence," Journal of Payments Strategy & Systems, Henry Stewart Publications, vol. 14(4), pages 392-410, December.
    15. Gandelman, Néstor & Lluberas, Rodrigo & Misail, Daniel & IDB Invest, 2023. "The Impact of a Financial Inclusion Program on Household’s Payment Choice, Savings, and Credit," IDB Publications (Working Papers) 12769, Inter-American Development Bank.
    16. Tobias Trütsch, 2020. "The impact of contactless payment on cash usage at an early stage of diffusion," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 156(1), pages 1-35, December.
    17. Kanokkarn Snae Namahoot & Ekkarat Boonchieng, 2023. "UTAUT Determinants of Cashless Payment System Adoption in Thailand: A Hybrid SEM-Neural Network Approach," SAGE Open, , vol. 13(4), pages 21582440231, December.
    18. Carin van der Cruijsen & Mirjam Plooij, 2018. "Drivers Of Payment Patterns At The Point Of Sale: Stable Or Not?," Contemporary Economic Policy, Western Economic Association International, vol. 36(2), pages 363-380, April.
    19. Gabriele Camera & Marco Casari & Stefania Bortolotti, 2016. "An Experiment on Retail Payments Systems," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(2-3), pages 363-392, March.
    20. Rodrigo Lluberas & Joaquín Saldain, 2014. "Paper or plastic? Payment instrument choice in Uruguay," Documentos de trabajo 2014007, Banco Central del Uruguay.
    21. Krivosheya, Egor, 2020. "The role of financial innovations in consumer behavior in the Russian retail payments market," Technological Forecasting and Social Change, Elsevier, vol. 161(C).
    22. Magnac, Thierry, 2017. "ATM foreign fees and cash withdrawals," Journal of Banking & Finance, Elsevier, vol. 78(C), pages 117-129.
    23. repec:bof:bofrdp:urn:nbn:fi:bof-201511251450 is not listed on IDEAS
    24. Arango, Carlos & Huynh, Kim P. & Sabetti, Leonard, 2015. "Consumer payment choice: Merchant card acceptance versus pricing incentives," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 130-141.
    25. repec:zbw:bofrdp:2015_022 is not listed on IDEAS

    More about this item

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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