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The Boston Fed study of consumer behavior and payment choice: a survey of Federal Reserve System employees
The way people pay for goods and services is changing dramatically, but little data and research on consumer behavior and payment choice are publicly available. This paper describes the results of a survey of payment behavior and attitudes taken by Federal Reserve employees in 2004. Major contributions of the survey are that it asks: 1) why payment choices are made; 2) why individual payment behavior has changed; and 3) why individual-specific payment characteristics matter for payment choice. Although the survey is not statistically representative of U.S. consumers, and thus may not provide accurate estimates of aggregate U.S. payment trends, many results are consistent with data from more representative payment surveys. For example, the data show a trend away from check-writing and toward electronic and emerging payment methods, but the choice of payment method depends on the type of payment, amount of payment, and other complex factors. Also, cost, convenience, and control over timing are the most important characteristics determining respondents' adoption and use of payment methods. We find that payment characteristics vary widely across respondents, partly because of inherent heterogeneity but perhaps also because of measurement error, misperception, or inadequate information (lack of consumer education). Cross-sectional evidence shows that respondents tend to use payment methods in a manner broadly consistent with their reported assessments of the payment characteristics.
AUTHORS: Crowe, Marianne; Blair, Krista; Schuh, Scott; Benton, Marques
Consumer behavior and payment choice: a conference summary
The Emerging Payments Research Group (EPRG) at the Federal Reserve Bank of Boston sponsored a new conference, ?Consumer Behavior and Payment Choice: How and Why Do Consumers Choose Their Payment Methods?? on October 27?28, 2005, at the Boston Fed. The conference brought together a diverse set of participants from the academic, private, and public sectors. This paper provides a summary and overview of the conference. Key conclusions are that the consumer?s decision-making process concerning payment choice is quite complex, that standard economic models have difficulty incorporating this complexity, that additional research?especially interdisciplinary research?into consumer choice of payment method is needed, and that this conference was an important step in that direction.
AUTHORS: Schuh, Scott; Crowe, Marianne; Stavins, Joanna
Mobile payments in the United States at retail point of sale: current market and future prospects
Although mobile payments are increasingly used in some countries, they have not been adopted widely in the United States so far, despite their potential to add value for consumers and streamline the payments system. After describing a few countries? experiences, we analyze the prospects for the U.S. market for mobile payments in retail payments, particularly the use of contactless and near-field communication technologies. We identify conditions that have facilitated some success in other countries and barriers to the adoption of mobile payments in the United States. On the demand side, consumers and merchants are well served by the current card system, and face a low expected benefit-cost ratio, at least in the short run. On the supply side, low market concentration and strong competitive forces of banks and mobile carriers make coordination of standards difficult. Furthermore, mobile payments are characterized by a network effects problem: consumers will not demand them until they know that enough merchants accept them, and merchants will not implement the technology until a critical mass of consumers justifies the cost of doing so. We present some policy recommendations that the Federal Reserve should consider.
AUTHORS: Crowe, Marianne; Stavins, Joanna; Rysman, Marc