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Indonesian Household Payment Choice: A Nested Logit Analysis

Author

Listed:
  • Nur Annisa Hasniawati

    (Department of Payment System Policy, Bank Indonesia)

  • Eva R. Lase

    (Department of Payment System Policy, Bank Indonesia)

  • Akhis R. Hutabarat

    (Department of Payment System Policy, Bank Indonesia)

Abstract

We examine the preferences of respondents for six types of payment instruments, namely cash, debit and credit cards, card and server-based electronic money, and internet or mobile banking. By applying a nested logit model to 500 household data covering six provincial capitals in Indonesia, we find that the decision to choose payment instruments is made sequentially. Socio-economic characteristics, including education, age, income, and transaction objectives or functionality have a significant effect on the probability of using non-cash electronic payment instruments. We find a substitution pattern between payment instruments, not only between cash and non-cash instruments but also between non-cash instruments. In light of these findings, appropriate payment system policies are in order to hasten the use of non-cash payment.

Suggested Citation

  • Nur Annisa Hasniawati & Eva R. Lase & Akhis R. Hutabarat, 2020. "Indonesian Household Payment Choice: A Nested Logit Analysis," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 9(special i), pages 291-313.
    • Handle: RePEc:cbk:journl:v:9:y:2020:i:si:p:291-313
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    References listed on IDEAS

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    More about this item

    Keywords

    Payment Preferences; Payment Instruments; Substitution between Payment Instruments;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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