Cashless payment methods and COVID-19: evidence from Japanese consumer panel data

This study aimed to investigate whether consumers increased the use of cashless payments and reduced cash payments after the COVID-19 outbreak. In doing so, we examined the effects of the Point Reward Project for Consumers Using Cashless Payments (PRP) program (a Japanese government program that subsidized the use of cashless payment methods by consumers, merchants, and payment service providers). We selected this program because it aimed to encourage cashless payments and was launched shortly before the initial COVID-19 outbreak and ended during the fourth wave of the pandemic. We compared Japanese consumers’ choices between four payment methods, cash, credit card, code payment, and electronic money, because many nonbanks began code payment services in anticipation of the PRP. We use data over four phases: before the PRP implementation, after the PRP implementation but before the spread of COVID-19, after the PRP implementation and after the spread of COVID-19, and during the spread of COVID-19 after the PRP ended. We do so to disentangle the effects of COVID-19 and the PRP on consumers’ choices of the four payment methods. Our counterfactual simulations show that, without implementing the PRP, the ratio of cash use would be higher by 0.04–0.08 points and that the ratios of code payment use and electronic money use would be lower by 0.02 and 0.08 points, respectively. If there had been no COVID-19 in Japan, the ratio of cash use would be higher by 0.03 points, and that of credit card use would be lower by 0.02 points.