IDEAS home Printed from https://ideas.repec.org/a/eee/reecon/v74y2020i4p292-300.html
   My bibliography  Save this article

Low-income consumers and payment choice

Author

Listed:
  • Shy, Oz

Abstract

Low-income consumers are not only constrained with spending, but also with the type and variety of payment methods available to them. Using a representative sample of the U.S. adult population, this short article analyzes the low possession (adoption) of credit and debit cards among low-income consumers who are also unbanked. Using a random utility model, I simulate the potential consumer welfare gains associated with policy options suggested in the literature to provide unsubsidized or subsidized debit cards, or subsidized prepaid cards to this consumer population. Simulation results show the relative improvement in consumer welfare among all three policy options.

Suggested Citation

  • Shy, Oz, 2020. "Low-income consumers and payment choice," Research in Economics, Elsevier, vol. 74(4), pages 292-300.
    • Handle: RePEc:eee:reecon:v:74:y:2020:i:4:p:292-300
    DOI: 10.1016/j.rie.2020.09.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1090944320303719
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.rie.2020.09.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Klee, Elizabeth, 2008. "How people pay: Evidence from grocery store data," Journal of Monetary Economics, Elsevier, vol. 55(3), pages 526-541, April.
    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. Kenneth S. Rogoff, 2016. "The Curse of Cash," Economics Books, Princeton University Press, edition 1, number 10798.
    4. Sergei Koulayev & Marc Rysman & Scott Schuh & Joanna Stavins, 2016. "Explaining adoption and use of payment instruments by US consumers," RAND Journal of Economics, RAND Corporation, vol. 47(2), pages 293-325, May.
    5. Ching, Andrew T. & Hayashi, Fumiko, 2010. "Payment card rewards programs and consumer payment choice," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1773-1787, August.
    6. Schmiedel, Heiko & Kostova, Gergana & Ruttenberg, Wiebe, 2012. "The social and private costs of retail payment instruments: a European perspective," Occasional Paper Series 137, European Central Bank.
    7. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555.
    8. Greene, Claire & Cole, Allison, 2017. "Financial Inclusion and Consumer Payment Choice," Journal of Financial Transformation, Capco Institute, vol. 46, pages 219-235.
    9. Fumiko Hayashi & Sabrina Minhas, 2018. "Who Are the Unbanked? Characteristics Beyond Income," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 55-70.
    10. Schmiedel, Heiko & Kostova, Gergana & Ruttenberg, Wiebe, 2012. "The social and private costs of retail payment instruments: a European perspective," Occasional Paper Series 137, European Central Bank.
    11. Anneke Kosse & Heng Chen & Marie-Hélène Felt & Valéry Dongmo Jiongo & Kerry Nield & Angelika Welte, 2017. "The Costs of Point-of-Sale Payments in Canada," Discussion Papers 17-4, Bank of Canada.
    12. Borzekowski, Ron & Kiser, Elizabeth K., 2008. "The choice at the checkout: Quantifying demand across payment instruments," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 889-902, July.
    13. Josh Hanson & Fumiko Hayashi & Jesse Leigh Maniff, 2015. "Driver of choice? the cost of financial products for unbanked consumers," Research Working Paper RWP 15-15, Federal Reserve Bank of Kansas City.
    14. Kim Huynh & Jozsef Molnar & Oleksandr Shcherbakov & Qinghui Yu, 2020. "Demand for Payment Services and Consumer Welfare: The Introduction of a Central Bank Digital Currency," Staff Working Papers 20-7, Bank of Canada.
    15. Fumiko Hayashi & William R. Keeton, 2012. "Measuring the costs of retail payment methods," Economic Review, Federal Reserve Bank of Kansas City, vol. 97(Q II).
    16. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Oz Shy, 2021. "Digital Currency, Digital Payments, and the 'Last Mile' to the Unbanked," Policy Hub, Federal Reserve Bank of Atlanta, vol. 2021(9), pages 1-9, August.
    2. Greene, Claire & Prescott, Brian & Shy, Oz, 2022. "How people pay each other: Data, theory, and calibrations," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    3. Claire Greene & Oz Shy, 2022. "Payment Card Adoption and Payment Choice," Policy Hub, Federal Reserve Bank of Atlanta, vol. 2022(10), July.
    4. Pooja Goel & Nitika Sharma & Raiswa Saha, 2024. "Consumption Behaviour of Poor Consumers: A Bibliometric and Content Analysis," FIIB Business Review, , vol. 13(3), pages 304-317, May.
    5. Shy, Oz, 2021. "Cashless stores and cash users," Journal of Policy Modeling, Elsevier, vol. 43(3), pages 622-638.
    6. Jose Aurazo & Farid Gasmi, 2024. "Financial inclusion transitions in Peru: does labor informality play a role?," BIS Working Papers 1200, Bank for International Settlements.
    7. repec:fip:a00001:89583 is not listed on IDEAS
    8. Jose Aurazo, 2024. "Interchange fees, access pricing and sub-acquirers in payment markets," BIS Working Papers 1163, Bank for International Settlements.
    9. Aurazo, Jose & Vega, Milton, 2021. "Why people use digital payments: Evidence from micro data in Peru," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 2(4).
    10. repec:fip:a00001:94158 is not listed on IDEAS
    11. Hway-Boon Ong & Lee-Lee Chong, 2023. "The effect of cashless payments on the internet and mobile banking," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 28(1), pages 178-188, March.
    12. Gasmi, Farid & Aurazo, Jose, 2022. "Labor informality and financial inclusion transitions: Evidence from Peru," TSE Working Papers 22-1349, Toulouse School of Economics (TSE).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shy, Oz, 2021. "Cashless stores and cash users," Journal of Policy Modeling, Elsevier, vol. 43(3), pages 622-638.
    2. Martin Brown & Nicole Hentschel & Hannes Mettler & Helmut Stix, 2020. "Financial Innovation, Payment Choice and Cash Demand - Causal Evidence from the Staggered Introduction of Contactless Debit Cards," Working Papers on Finance 2002, University of St. Gallen, School of Finance.
    3. Martin Brown & Nicole Hentschel & Hannes Mettler & Helmut Stix, 2020. "Financial Innovation, Payment Choice and Cash Demand – Causal Evidence from the Staggered Introduction of Contactless Debit Cards (Martin Brown,Nicole Hentschel, Hannes Mettler, Helmut Stix)," Working Papers 230, Oesterreichische Nationalbank (Austrian Central Bank).
    4. Tobias Trütsch, 2016. "The impact of mobile payment on payment choice," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 30(3), pages 299-336, August.
    5. Toshitaka Sekine & Toshiaki Shoji & Tsutomu Watanabe, 2021. "Going Cashless: Evidence from Japan’s Point Reward Program," Working Papers on Central Bank Communication 036, University of Tokyo, Graduate School of Economics.
    6. Toshitaka Sekine & Toshiaki Shoji & Tsutomu Watanabe, 2022. "Going Cashless: Government’s Point Reward Program vs. COVID-19," Working Papers on Central Bank Communication 040, University of Tokyo, Graduate School of Economics.
    7. Joanna Stavins, 2017. "How do consumers make their payment choices?," Research Data Report 17-1, Federal Reserve Bank of Boston.
    8. Vania Silva & Esmeralda Ramalho & Carlos Vieira, 2016. "Is EMV adoption changing card payments? Evidence from the European Union," CEFAGE-UE Working Papers 2016_05, University of Evora, CEFAGE-UE (Portugal).
    9. Martikainen, Emmi & Schmiedel, Heiko & Takalo, Tuomas, 2015. "Convergence of European retail payments," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 81-91.
    10. 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.
    11. Toshitaka Sekine & Toshiaki Shoji & Tsutomu Watanabe, 2022. "Going Cashless: Government’s Point Reward Program vs. COVID-19," CARF F-Series CARF-F-538, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    12. Toshitaka Sekine & Toshiaki Shoji & Tsutomu Watanabe, 2021. "Going Cashless: Evidence from Japan’s Point Reward Program," CARF F-Series CARF-F-525, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    13. Vânia G. Silva & Esmeralda A. Ramalho & Carlos R. Vieira, 2017. "The Use of Cheques in the European Union: A Cross-Country Analysis," Open Economies Review, Springer, vol. 28(3), pages 581-602, July.
    14. Guerino Ardizzi & Andrea Nobili & Giorgia Rocco, 2020. "A game changer in payment habits: evidence from daily data during a pandemic," Questioni di Economia e Finanza (Occasional Papers) 591, Bank of Italy, Economic Research and International Relations Area.
    15. Kosse, Anneke, 2013. "Do newspaper articles on card fraud affect debit card usage?," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5382-5391.
    16. Wojciech Ewider, 2021. "Development of modern payment methods in Poland as an example of technological leapfrogging," Zeszyty Naukowe Małopolskiej Wyższej Szkoły Ekonomicznej w Tarnowie / The Malopolska School of Economics in Tarnow Research Papers Collection, Malopolska School of Economics in Tarnow, vol. 50(2), pages 79-91, June.
    17. 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.
    18. Kim Huynh & Jozsef Molnar & Oleksandr Shcherbakov & Qinghui Yu, 2020. "Demand for Payment Services and Consumer Welfare: The Introduction of a Central Bank Digital Currency," Staff Working Papers 20-7, Bank of Canada.
    19. Carlos A. Arango-Arango & Héctor M. Zárate-Solano & Nicolás F. Suárez-Ariza, 2017. "Determinantes del Acceso, Uso y Aceptación de Pagos Electrónicos en Colombia," Borradores de Economia 999, Banco de la Republica de Colombia.
    20. Carin van der Cruijsen & Lola Hernandez & Nicole Jonker, 2017. "In love with the debit card but still married to cash," Applied Economics, Taylor & Francis Journals, vol. 49(30), pages 2989-3004, June.

    More about this item

    Keywords

    Consumer payment choice; Household income; Financial inclusion; Unbanked consumers;
    All these keywords.

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:reecon:v:74:y:2020:i:4:p:292-300. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622941 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.