Consumer Behavior and Payment Choice
How and Why Do Consumers Choose Their Payment Methods?
This Event Has Ended
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).
Agenda
Thursday, October 27
Reception
Cityside Lounge
Dinner
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
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.
Adjournment
Friday, October 28
Continental Breakfast
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
"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.
Presenter:
Leo Van Hove
Associate Professor of Economics
The Free University of Brussels
Discussant:
Leon Majors
President
ESP Consulting Group
Elizabeth C. Klee
Economist
Board of Governors of the Federal Reserve System
Break
New England Room Bridge Area
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?"
Moderator:
Tony Hayes
Managing Director, Financial Services
Dove Consulting
Panelists:
Tim Attinger
Senior Vice President, Product Innovation and Development
VISA USA
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
General Discussion
Lunch
Boston Room
Remarks:
Cathy E. Minehan
President and Chief Executive Officer
Federal Reserve Bank of Boston
"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.
Presenter:
William Roberds
Research Economist and Policy Advisor
Federal Reserve Bank of Atlanta
Discussants:
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
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.
Moderator:
Steve Ledford
Chief Executive Officer
Global Concepts
Panelists:
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
Break
New England Room Bridge Area
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.
Presenter:
Richard D. Porter
Senior Policy Advisor
Federal Reserve Bank of Chicago
Discussants:
Marc Rysman
Assistant Professor of Economics
Department of Economics
Boston University
Steven Jacques
Director of Business Development
Massachusetts Turnpike Authority
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
Adjournment and Closing Reception
Economic Adventure
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