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Working Paper
Alternative Methods for Studying Consumer Payment Choice
Using machine learning techniques applied to consumer diary survey data, the author of this working paper examines methods for studying consumer payment choice. These techniques, especially when paired with regression analyses, provide useful information for understanding and predicting the payment choices consumers make.
Journal Article
Digital Currency, Digital Payments, and the 'Last Mile' to the Unbanked
Digital forms of payment are either not accessible or highly costly for unbanked consumers. This is because these forms of payment must be "funded" by some source of money, such as cash or a bank account. That creates the "last-mile" problem for the unbanked. This article examines various solutions for the funding problem that have been proposed in the literature, by regulators, and in bills submitted to Congress.
Discussion Paper
Who gains and who loses from credit card payments?: theory and calibrations
Merchant fees and reward programs generate an implicit monetary transfer to credit card users from non-card (or ?cash?) users because merchants generally do not set differential prices for card users to recoup the costs of fees and rewards. On average, each cash-using household pays $151 to card-using households and each card-using household receives $1,482 from cash users every year. Because credit card spending and rewards are positively correlated with household income, the payment instrument transfer also induces a regressive transfer from low-income to high-income households in general. ...
Report
How Consumers Get Cash: Evidence from a Diary Survey
Most research on payment instruments focuses on how consumers pay or spend their money using a wide variety of payment instruments including cash. This report focuses on the inverse of the question of spending, that is, how do consumers obtain cash? Data from the 2017 Diary of Consumer Payment Choice shows that, over a three-day period, about 21 percent of survey respondents get cash via various methods, such as getting cash from a family member or friend, using an ATM, getting cash back at retail, visiting a bank teller, etc. We find that consumers mostly get cash from family and friends, ...
Report
Merchant steering of consumer payment choice: lessons learned from consumer surveys
Recent policy changes allow merchants to influence consumers? choice of payment instruments by offering price discounts and other incentives. This report describes lessons learned from using consumer survey responses to assess whether merchants tried to influence buyers? choice of payment method. To measure the effects of these recent policy changes, we included questions about merchant steering in pilot versions of a new diary survey of U.S. consumers. Our findings are inconclusive because some respondents interpreted the questions differently from the way we intended. This report aims to ...
Working Paper
How People Pay Each Other: Data, Theory, and Calibrations
Using a representative sample of the U.S. adult population, we analyze which payment methods consumers use to pay other consumers (p2p) and how these choices depend on transaction and demographic characteristics. We additionally construct a random matching model of consumers with diverse preferences over the use of different payment methods for p2p payments. The random matching model is calibrated to the share of p2p payments made with cash, paper check, and electronic technologies observed from 2015 to 2019. We find about two thirds of consumers have a first p2p payment preference of cash. ...
Report
Costs and benefits of building faster payment systems: the U.K. experience and implications for the United States
This paper studies the economic cost-benefit analysis behind the decision by the United Kingdom on how to implement its Faster Payments Service (FPS), which allows consumers and businesses to rapidly transfer money between bank accounts, and draws implications for the U.S. payments system.
Journal Article
Payment Card Adoption and Payment Choice
Using data from the 2021 Diary of Consumer Payment Choice, this article investigates two questions: how do consumers without credit or debit cards make payments, and do consumers without these payment cards differ from other consumers?
Working Paper
Efficient organization of production: nested versus horizontal outsourcing
The authors characterize equilibrium and efficient modes of production by comparing nested (vertical) outsourcing with horizontal outsourcing. Nested outsourcing is found to be inefficient unless the cost of monitoring outsourced production lines increases sharply with the number of subcontractors and not only with the number of outsourced components. They characterize a market failure in which nested outsourcing is selected when the case dictates that horizontal outsourcing is the efficient outsourcing mode. This failure occurs at an intermediate range of the costs of monitoring outsourcing ...
Report
U.S. Consumers' Use of Personal Checks: Evidence from a Diary Survey
This paper presents a snapshot of U.S. consumers’ use of paper checks in 2017 and 2018, combining data from the 2017and 2018 Diaries of Consumer Payment Choice.Other data sources have tracked the decline in the use of paper checks since 2000. This report adds to that data by delving into the characteristics of 1,600 individual transactions—in particular, dollar amount, payee, and payer—made by a representative sample of U.S. consumers using checks. Among the findings:•Consumers used checks for 7 percent of transactions overall in 2017 and 2018 and wrote about three checks a ...