Advertisement

Financial Markets and Portfolio Management

, Volume 30, Issue 3, pp 299–336 | Cite as

The impact of mobile payment on payment choice

  • Tobias TrütschEmail author
Article

Abstract

This paper investigates the effect of mobile payment on the adoption and use of traditional payment instruments such as cash, checks, and credit, debit and prepaid cards at the point of sale (POS). Data are from a 2012 representative survey on consumer payment choice in the United States. Using discrete-choice random utility models to simulate consumer behavior, the estimation provides two major findings. First, mobile payment does not replace physical payment cards, but is likely to substitute for paper-based payment methods such as cash and checks at the adoption stage. Second, mobile payment does not statistically significantly influence the choice of payment means at the POS in terms of usage. However, there is suggestive evidence that it is complementary to card payments and a substitute for paper-based payment instruments. The findings highlight the potential social welfare gains of mobile payment and provide key insights into challenging issues for the private industry sector. This paper furthermore offers novel evidence on the impact of mobile payment on the use and adoption of existing payment instruments and contributes to the literature on consumer payment choice.

Keywords

Mobile payment Payment behavior Payment innovation Retail payments Payment cards 

JEL Classification

D12 G21 O33 

Notes

Acknowledgments

The author thanks the anonymous referee for his/her constructive comments and valuable inputs, which substantially improved this paper.

References

  1. Agarwal, S., Chakravorti, S., Lunn, A.: Why do banks reward their customers to use their credit cards? Working Paper 2010–19, Federal Reserve Bank of Chicago (2010)Google Scholar
  2. Amromin, G., Chakravorti, S.: Whither loose change? The diminishing demand for small-denomination currency. J. Money Credit Bank. 41(2–3), 315–335 (2009)CrossRefGoogle Scholar
  3. Arango, C., Bouhdaoui, Y., Bounie, D., Eschelbach, M., Hernández, L.: Cash management and payment choices: a simulation model with international comparisons. Working Paper 2013–53, Bank of Canada (2013)Google Scholar
  4. Arango, C., Hogg, D., Lee, A.: Why is cash (still) so entrenched? Insights from Canadian shopping diaries. Contemp. Econ. Policy 33(1), 141–158 (2015a)CrossRefGoogle Scholar
  5. Arango, C., Huynh, K.P., Sabetti, L.: Consumer payment choice: merchant card acceptance versus pricing incentives. J. Bank. Finance 55, 130–141 (2015b)CrossRefGoogle Scholar
  6. Au, Y.A., Kauffman, R.J.: The economics of mobile payment: understanding stakeholder issues for an emerging financial technology application. Electron. Commer. Res. Appl. 7, 141–164 (2008)CrossRefGoogle Scholar
  7. Bolt, W., Jonker, N., van Renselaar, C.: Incentives at the counter: an empirical analysis of surcharching card payments and payment behaviour in the Netherlands. J. Bank. Finance 34, 1738–1744 (2010)CrossRefGoogle Scholar
  8. Borzekowski, R., Kiser, E.K., Ahmed, S.: Consumers’ use of debit cards: patterns, preferences, and price response. J. Money Credit Bank. 40(1), 149–172 (2008)CrossRefGoogle Scholar
  9. Borzekowski, R., Kiser, E.K.: The choice at the checkout: quantifying demand across payment instruments. Int. J. Ind. Organ. 26, 889–902 (2008)CrossRefGoogle Scholar
  10. Bouhdaoui, Y., Bounie, D.: Modeling the share of cash payments in the economy. Int. J. Central Bank. 8(4), 175–195 (2012)Google Scholar
  11. Bounie, D., François, A.: Cash, check or bank card? The effects of transaction characteristics on the use of payment instruments. In: Presented at the FMG & CASS Business School Conference, Workshop on Financial Regulation and Payment Systems, London (2006)Google Scholar
  12. Brown, A., Dodini, S., Gonzalez, A., Merry, E., Thomas, L.: Consumers and mobile financial services 2015. Board of Govenors of the Federal Reserve System [Online]. https://doi.org/www.federalreserve.gov/publications/default.htm (2015). Accessed 08 Sept 2015
  13. Carbó-Valverde, S., Lin̋ares-Zegarra, J.M.: How effective are rewards programs in promoting payment card usage? Empirical evidence. J. Bank. Finance 35(12), 3275–3291 (2011)CrossRefGoogle Scholar
  14. Ching, A.T., Hayashi, F.: Payment card rewards programs and consumer payment choice. J. Bank. Finance 34(8), 1773–1787 (2010)CrossRefGoogle Scholar
  15. Cohen, M., Rysman, M.: Payment choice with consumer panel data. Working Papers No. 13-06, Federal Reserve Bank of Boston (2013)Google Scholar
  16. Dahlberg, T., Mallat, N., Ondrus, J., Zmijewska, A.: Past, present and future of mobile payments research: a literature review. Electron. Commer. Res. Appl. 7, 165–181 (2008)CrossRefGoogle Scholar
  17. Dahlberg, T., Guo, J., Ondrus, J.: A critical review of mobile payment research. Electron. Commer. Res. Appl. 14, 265–284 (2015)CrossRefGoogle Scholar
  18. Deutsche Bundesbank: Zahlungsverhalten in Deutschland 2014—Dritte Studie über die Verwendung von Bargeld und unbaren Zahlungsinstrumenten [Online]. https://doi.org/www.bundesbank.de (2015). Accessed 22 Aug 2015
  19. European Commission: Study on the effects of information disclosure on consumer choice of payment instruments [Online]. https://doi.org/ec.europa.eu/competition/sectors/financial_services/mif_final_report_en.pdf (2013). Accessed 11 Aug 2015
  20. Eschelbach, M., Schmidt, T.: Precautionary motives in short-term cash management—evidence from German POS transactions. Bundesbank Discussion Paper No. 38/2013, Deutsche Bundesbank (2013)Google Scholar
  21. Garcia-Swartz, D.D., Hahn, R.H., Layne-Farrar, A.: The move towards a cashless society: calculating the costs and the benefits. Rev. Netw. Econ. 5(2), 199–228 (2002)Google Scholar
  22. Hausman, J., McFadden, D.: Specification tests for the multinomial logit model. Econometrica 52(5), 1219–1240 (1984)CrossRefGoogle Scholar
  23. Humphrey, D.B., Pulley, L.B., Vesala, J.: Cash, paper and electronic payments: a cross-country analysis. J. Money 28(4), 914–939 (1996)CrossRefGoogle Scholar
  24. Humphrey, D.B., Kim, M., Vale, B.: Realizing the gains from electronic payments: cost, pricing and payment choice. J. Money Credit Bank. 33(2), 216–234 (2001)CrossRefGoogle Scholar
  25. Jonker, N.: Payment instruments as perveived by consumers: results from a household survey. De Economist 155, 21–38 (2007)CrossRefGoogle Scholar
  26. Kim, C., Mirusmonov, M., Lee, I.: An empirial examination of factors influencing the intention to use mobile payment. Comput. Hum. Behav. 26, 310–322 (2010)CrossRefGoogle Scholar
  27. Klee, E.: How people pay: evidence from grocery store data. J. Monet. Econ. 55, 526–541 (2008)CrossRefGoogle Scholar
  28. Kosse, A., Jansen, D.J.: Choosing how to pay: the influence of foreign backgrounds. J. Bank. Finance 37, 989–998 (2013)CrossRefGoogle Scholar
  29. Koulayev, S., Rysman, M., Schuh, S., Stavins, J.: Explaining adoption and use of payment instruments by U.S. consumers?, Working Paper 2012–14, Federal Reserve Bank of Boston (2012)Google Scholar
  30. Liébana-Cabanillas, F., Sánchez-Fernández, J., Mun̋oz-Leiva, F.: Antecedents of the adoption of the new mobile payment systems: the moderating effect of age. Comput. Hum. Behav. 35, 464–478 (2014)CrossRefGoogle Scholar
  31. Liu, J., Kauffman, R.J., Ma, D.: Competition, cooperation, and regulation: understanding the evolution of the mobile payments technology ecosystem. Electronic 14, 372–391 (2015)Google Scholar
  32. Mallat, N.: Exploring consumer adoption of mobile payments—a qualitative study. J. Strateg. Inf. Syst. 16, 413–432 (2007)CrossRefGoogle Scholar
  33. Martin, S.: Statement before the Committee on Financial Services Subcommittee on Financial Institutions and Consumer Credit U.S. House of Representatives. Board of Governors of the Federal Reserve System, Washington, D.C (2012)Google Scholar
  34. Massoud, N., Saunders, A., Scholnick, B.: The cost of being late? The case of credit card penalty fees. J. Financial Stab. 7, 49–59 (2011)CrossRefGoogle Scholar
  35. McFadden, D.: Conditional logit analysis of qualitative choice analysis. In: Zarembka, P. (ed.) Frontiers in Econometrics. Academic Press, London/New York (1973)Google Scholar
  36. Ondrus, J., Pigneur, Y.: A systematic approach to explain the delayed deployment of mobile payments in Switzerland. In: Proceedings of the Fifth International Conference on Mobile Business (ICMB), Copenhagen, June 26–27 (2006a)Google Scholar
  37. Ondrus, J., Pigneur, Y.: A disruption analysis in the mobile payment market. In: Sprague, R. (ed.) Proceedings of the 38th Hawaii International Conference on Systems Science, Big Island, HI, USA, January 3–6. IEEE Computing Society Press, Los Alamitos (2005)Google Scholar
  38. Ondrus, J., Pigneur, Y.: Towards a holistic analysis of mobile payments: a multiple perspective approach. Electron. Commer. Res. Appl. 5(3), 246–257 (2006b)CrossRefGoogle Scholar
  39. Pianalto, S.: Collaborating to improve the U.S. payments system [Online]. https://doi.org/www.clevelandfed.org (22.10.12) (2012)
  40. Polasik, M., Gorka, J., Wilczewski, G., Kunkowski, J., Przenajkowska, K., Tetkowska, N.: Time efficiency of point-of-sale payment methods: empirical results for cash, cards and mobile payments. In: Cordeiro, J., Maciaszek, L.A., Filipe, J. (eds.) Enterprise Information Systems, Lecture Notes in Business Information Processing, vol. 141, pp. 306–320. Springer, Berlin, Heidelberg (2013)Google Scholar
  41. Rogers, E.M.: Diffusion of innovation, 5th edn. The Free Press, New York (2003)Google Scholar
  42. Rysman, M.: An empirical analysis of payment card usage. J. Ind. Econ. 55, 1–36 (2007)CrossRefGoogle Scholar
  43. Schmiedel, H., Kostova, G.L., Ruttenberg, W.: The social and private costs of retail payment instruments: a European perspective. J. Financial Mark. Infrastruct. 2(1) (2013)CrossRefGoogle Scholar
  44. Schuh, S., Stavins, J.: How do speed and security influence consumers’ payment behavior? Current Policy Perspectives No. 15-1, The Federal Reserve Bank of Boston (2015)Google Scholar
  45. Schuh, S., Stavins, J.: The 2011 and 2012 survey of consumer payment choice. Research Data Report No. 14-1, The Federal Reserve Bank of Boston (2014)Google Scholar
  46. Schuh, S., Stavins, J.: Why are (some) consumers (finally) writing fewer checks? The role of payment characteristics. J. Bank. Finance 34(8), 1745–1758 (2010)CrossRefGoogle Scholar
  47. Schuh, S., Stavins, J.: How consumers pay: adoption and use of payments. Account. Finance Res. 2(2), 1–21 (2013)Google Scholar
  48. Simon, J., Smith, K., West, T.: Price incentives and consumer payment behaviour. J. Bank. Finance 34(8), 1759–1772 (2010)CrossRefGoogle Scholar
  49. Snellman, J., Vesala, J., Humphrey, D.B.: Substitution of noncash payment instruments for cash in Europe. J. Financial Serv. Res. 19(2/3), 131–145 (2001)CrossRefGoogle Scholar
  50. Stavins, J.: Potential effects of an increase in debit card fees. Public Policy Briefs No. 11-3, Federal Reserve Bank of Boston (2011)Google Scholar
  51. Stavins, J.: Effect of consumer characteristics on the use of payment instruments. N. Engl. Econ. Rev. 3, 19–31 (2001)Google Scholar
  52. Train, K.: Discrete choice methods with simulation, 2nd edn. Cambridge University Press, Cambridge (2009)CrossRefGoogle Scholar
  53. van der Horst, F., Matthijsen, E.: The irrationality of payment behaviour. DNB Occas. Stud. 11(4) (2013)Google Scholar
  54. van Hove, L.: On the war on cash and its spoils. Int. J. Electron. Bank. 1(1), 36–45 (2008)CrossRefGoogle Scholar
  55. von Kalckreuth, U., Schmidt, T., Stix, H.: Using cash to monitor liquidity—implications for payments, currency demand and withdrawal behavior. J. Money Credit Bank. 46(8), 1753–1785 (2014)CrossRefGoogle Scholar
  56. Xin, H., Techatassanasoontorn, A.A., Tan, F.B.: Antecedents of consumer trust in mobile payment adoption. J. Comput. Inf. Syst. 55(4), 1–10 (2015)Google Scholar
  57. Yang, S., Lu, Y., Gupta, S., Cao, Y., Zhang, R.: Mobile payment services adoption across time: an empirical study of the effects of behavioral beliefs, social influence, and personal traits. Comput. Hum. Behav. 28, 129–142 (2012)CrossRefGoogle Scholar
  58. Zinman, J.: Debit or credit? J. Bank. Finance 33, 358–366 (2009)CrossRefGoogle Scholar

Copyright information

© The Author(s) 2016

Open AccessThis article is distributed under the terms of the Creative Commons Attribution 4.0 International License (https://doi.org/creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.

Authors and Affiliations

  1. 1.Executive School of Management, Technology and LawUniversity of St. GallenSt. GallenSwitzerland

Personalised recommendations