Consumer Behavior and Payment Choice Consumer Behavior and Payment Choice

How and Why Do Consumers Choose Their Payment Methods? How and Why Do Consumers Choose Their Payment Methods?

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Thursday, October 27
5:00 p.m. - 8:30 p.m.
Friday, October 28
7:30 a.m. - 5:00 p.m.
Connolly Center, 4th Floor
Federal Reserve Bank of Boston
600 Atlantic Avenue

While a good deal is understood about the supply side of the retail payments market, very little is understood about the demand or consumer side, especially why consumers choose one payment method over another. This conference will bring together economic researchers and payments system participants to explore what we know and don’t know about how consumers choose among payment methods and about the implications of their decisions for saving, consumption, and portfolio allocation.

A Conference Summary was published as Research Department Public Policy Discussion Paper P06-1.

Papers are available as portable document format (PDF) files. For individual papers, see the agenda below. You may also download all 6 conference papers in a compressed zip archive.

Full color conference program (including agenda and biographies).


Thursday, October 27

5:00 p.m. – 8:30 p.m.


Cityside Lounge

6:00 p.m. – 7:15 p.m.


Harborview Dining Room

Opening Remarks – Perspectives on Emerging Payments

Jeffrey Fuhrer

Senior Vice President and Director of Research

Federal Reserve Bank of Boston

Sarah G. Green

Executive Vice President

Federal Reserve Bank of Boston

7:15 p.m. – 7:45 p.m.

What Do You Think? - survey results

A fun-filled, voluntary electronic survey that explores how conference participants - consumers - view the central issues and ideas on consumer payment behavior to be discussed during the conference.

7:45 p.m. – 8:30 p.m.


Friday, October 28

7:30 a.m. – 8:30 a.m.

Continental Breakfast

8:30 a.m. – 9:15 a.m.

Consumer Payment Behavior Overview:

How and Why Do Consumers Choose Their Payment Methods? This overview will summarize the existing literature on consumer payment behavior: what we know and don’t know, what we need to know, and the implications for public policy.

Stacey L Schreft

Vice President and Economist

Federal Reserve Bank of Kansas City

9:15 a.m. – 10:15 a.m.

"Who's Afraid of the Cashless Society? Belgian Survey Evidence" - by Ellen Loix, Roland Pepermans, and Leo Van Hove

This session will summarize the results of a 2004 survey of Belgian consumer payment practices. The survey focused on payment methods at the point of sale: cash, debit cards, electronic purses, credit cards, and retailer cards. The paper relates adoption and usage of the various payment methods to respondents' demographic and financial characteristics, their propensity to adopt new technologies, and supply-side factors.


Leo Van Hove

Associate Professor of Economics

The Free University of Brussels


Leon Majors


ESP Consulting Group

Elizabeth C. Klee


Board of Governors of the Federal Reserve System

10:15 a.m. – 10:30 a.m.


New England Room Bridge Area

10:30 a.m. – 11:45 a.m.

Understanding Consumer Behavior at the Point of Sale

Consumers make millions of payments at retail establishments, also known as point of sale or POS transactions. Fifty years ago consumers had only two POS payment options—cash or check. Now they have many choices: credit card, check, cash, store-issued charge card, stored-value card, debit card, or EFT. How do they decide which payment method to use? Is cost a major factor? What about demographic characteristics? Does the dollar value of the transaction determine the selection? What has caused consumers to switch from checks to electronic payments? How are incentives (e.g., miles) influencing payment behavior? Are these incentives distorting payment behavior in a way that is costly for the retailer?

Jonathan Zinman will open this session with a brief overview of his paper "Debit or Credit?"


Tony Hayes

Managing Director, Financial Services

Dove Consulting


Tim Attinger

Senior Vice President, Product Innovation and Development


Lorraine Fischer

Senior Vice President, Payment Strategies

Wachovia Bank

Joseph Garbarino

Vice President, Financial Services

Wegmans Food Markets

Denis Bouchard

Director of Payment Services

Wal-Mart Stores, Inc.

Jonathan Zinman

Assistant Professor

Department of Economics

Dartmouth College

Paper: "Debit or Credit?"

General Discussion

11:45 a.m. – 1:00 p.m.


Boston Room


Cathy E. Minehan

President and Chief Executive Officer

Federal Reserve Bank of Boston

1:00 p.m. – 2:00 p.m.

"Credit and Identity Theft" by Charles M. Kahn and William Roberds

The quintessential crime of the information age is identity theft, the malicious use of personal identifying data. In this paper, the authors present a model of identities and their use in credit transactions. The incidence of identity theft represents a tradeoff between a desire to avoid costly and/or invasive monitoring of individuals on the one hand, and the need to control transaction fraud on the other. The results suggest that technological advances will not eliminate this tradeoff.


William Roberds

Research Economist and Policy Advisor

Federal Reserve Bank of Atlanta


Nobuhiro Kiyotaki

Professor of Economics

London School of Economics

Seth Berman

Assistant U.S. Attorney

U.S. Attorney's Office for the District of Massachusetts

2:00 p.m. – 3:15 p.m.

Understanding Consumer Bill Payment Behavior

Bills have traditionally been paid by writing checks and sending them with statements by U.S. mail. Increasingly, bills are being paid by automated clearinghouse debits. More recently, the Internet has created new bill payment methods such as online banking and online credit card payments. These new options offer consumers convenience, speed, and the ability to better control payment timing. How do consumers decide whether or not to adopt different forms of bill payment? Are the same consumers using different methods depending on the type of bill or the amount? Will check ever disappear as a bill payment method?

Tansel Yilmazer will begin this session with a summary of "The Determinants of Consumers' Adoption of Internet Banking", a paper authored by Yilmazer, Byoung-Min Kim, and Richard Widdows.


Steve Ledford

Chief Executive Officer

Global Concepts


Robert Pedersen

Vice President and Treasurer

United States Postal Service

Patty Thorell

Vice President, Payment Processing

Comcast Cable Communications

Robert Wilson bio

Industry Initiative & Payment Strategy Executive

Global Treasury Services Group

JPMorgan Chase

Tansel Yilmazer

Assistant Professor

Purdue University

Paper: "The Determinants of Consumers' Adoption of Internet Banking"

General Discussion

3:15 a.m. – 3:30 a.m.


New England Room Bridge Area

3:30 p.m. – 4:30 p.m.

Transforming Payment Choices by Doubling Fees on the Illinois Tollway (6.7MB) by Gene Amromin, Carrie Jankowski, and Richard D. Porter

On January 1, 2005, Illinois doubled the highway toll for travelers paying with cash, but kept the price unchanged for those paying electronically. This paper combines a theoretical model of payment choice with empirical analysis based on this rare natural experiment of differential pricing depending on the method of payment: cash versus electronic payment. An actual response to a price change allows the authors to estimate the sensitivity of consumer payment demand to prices.


Richard D. Porter

Senior Policy Advisor

Federal Reserve Bank of Chicago


Marc Rysman

Assistant Professor of Economics

Department of Economics

Boston University

Steven Jacques

Director of Business Development

Massachusetts Turnpike Authority

4:30 p.m. – 5:00 p.m.

Conference Summary

This session will summarize what we have learned during the conference. What are the immediate needs for further research? What are the implications for Federal Reserve policy?

Victor Stango

Associate Professor of Economics

Tuck School of Business Administration

Dartmouth College

5:00 p.m.

Adjournment and Closing Reception

Economic Adventure