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We study an at-scale natural experiment in which debit cards were given to cash transfer recipients who already had a bank account. Using administrative account data and household surveys, we find that beneficiaries accumulated a savings stock equal to 2% of annual income after two years with the card. The increase in formal savings represents an increase in overall savings, financed by a reduction in current consumption. There are two mechanisms. First, debit cards reduce transaction costs of accessing money. Second, they reduce monitoring costs, which led beneficiaries to check their account balances frequently and build trust in the bank.

Motivated by recent policy intervention into payments markets, we develop and estimate a structural model of adoption and use of payment instruments by U.S. consumers. Our structural model differentiates between the adoption and use of payment instruments. We evaluate substitution among payment instruments and welfare implications. Cash is the most significant substitute to debit cards in retail settings, whereas checks are the most significant in bill-pay settings. Furthermore, low income consumers lose proportionally more than high income consumers when debit cards become more expensive, whereas the reverse is true when credit cards do.

PurposeThis research provides a new perspective in explaining cardholders' willingness to use debit cards instead of cash by applying the transaction costs economic theory. This study also expands the adaptation of transaction cost economics theory in explaining consumer behaviour by investigating the moderating effects of income and education level on the relationship between perceived transaction costs and willingness to use debit cards.Design/methodology/approachThe conceptual framework was developed primarily from the transaction cost economics theory. An in-depth interview method was employed to further support hypothesis development and the development of measurement scales. A structural equation model linking asset specificity, behavioural uncertainty, environmental uncertainty, frequency of payment, perceived monitoring costs, perceived adaptation costs and willingness to use debit cards was tested using data from a sample of 384 Vietnamese debit card holders.FindingsThis study's results support the transaction cost economics theory that asset specificity, uncertainty and frequency of payment all positively contribute to the perceived transaction costs associated with debit card usage. However, only environmental uncertainty and perceived adaptation costs have significant negative impact on willingness to use debit cards, with the relationship between environmental uncertainty and willingness to use debit cards being totally mediated by perceived adaptation costs. Moreover, the relationship between perceived adaptation costs and willingness to use debit cards becomes less negative among richer and better-educated cardholders.Practical implicationsThe research provides insights into the hidden obstacles for developing cashless economies, thereby supporting policy makers in designing more effective and comprehensive strategies to make debit cards more widely used as a true substitute for cash.Originality/valueThis study provides a new lens in explaining customer willingness to use debit cards, while expanding the transaction costs economics theory by incorporating demographic factors as moderators in the relationship between transaction costs and the card-or-cash choice.

Purpose The purpose of this paper is to understand the determinants of financial inclusion and the determinants of barriers to financial inclusion in India. Also, the purpose is to ascertain the determinants of informal financial activities in India. Design/methodology/approach The data have been collected from the Global Findex Database (Findex) 2017. Various measures of financial inclusion, namely, ownership formal accounts, use of accounts for saving and borrowing, ownership and use of the debit card are used. The independent variables used are: age, income, education and gender. Given the binary nature of dependent variables, this paper uses the Probit model to draw the inferences. Findings The results show that gender, age, education and income have a significant impact on the various measures of financial inclusion. Additionally, these factors have a significant impact on the informal saving and borrowing. Research limitations/implications The given study uses the deferent measures of financial inclusion. An index of financial inclusion created using all the financial inclusion measures would be a better indicator of financial inclusion. Practical implications The results of this study would be useful for policymakers to identify the determinants and barriers of financial inclusion in India. The results show that policymakers should focus on the female population, in particular, and education and income enhancing measures, in general, to make financial inclusion more inclusive. Originality/value The study is the first of its kind to analyze financial inclusion in India using the Findex. Unlike previous studies, variables such as education and income are constructed more pragmatically. In particular, the study tries to understand the socio-economic determinants of financial inclusion measured as ownership of formal accounts, formal saving, formal credit, ownership of debit cards and use of debit cards. The study also analyzes the determinants of barriers to financial inclusion, savings (formal and informal) and borrowing (formal and informal).

PurposeConsumers in the Netherlands made more than 3.2 billion debit card transactions at points-of-sale in 2015, corresponding to over half of all point-of-sale payments in that year. This study provides insights into the environmental impact of debit card transactions based on a life cycle assessment (LCA). In addition, it identifies several areas within the debit card payment chain where the environmental impact can be reduced.MethodsThe debit card payment system can be divided into three subsystems: debit cards, payment terminals, and data centers used for transaction processing. Input data for all elements within each subsystem (manufacturing, transport, energy use, and disposal) were retrieved from interviews and literature study. Seven key companies and authorities within the debit card system such as the Dutch Payments Association, two banks, two data centers, one payment terminal producer and a recycling company contributed data. The analysis is conducted using SimaPro, the Ecoinvent 3.0 database and the ReCiPe endpoint (H) impact assessment method.Results and discussionOne Dutch debit card transaction in 2015 is estimated to have an absolute environmental impact of 470 μPt. Within the process chain of a debit card transaction, the relative environmental impact of payment terminals is dominant, contributing 75% of the total impact. Terminal materials (37%) and terminal energy use (27%) are the largest contributors to this share, while the remaining impact comprises data center (11%) and debit card (15%) subsystems. For data centers, this impact mainly stems from their energy use. Finally, scenario analyses show that a significant decrease (44%) in the environmental impact of the entire debit card payment system could be achieved by stimulating the use of renewable energy in payment terminals and data centers, reducing the standby time of payment terminals and increasing the lifetimes of debit cards.ConclusionsFor the first time, the environmental consequences of electronic card payment systems are evaluated. The total environmental impact of debit card transactions in the Netherlands is relatively modest compared to the impact of cash payments, which are the closest substitute of debit card payments at the point-of-sale. Scenario analysis indicates that the environmental impact can be reduced by 44%.

We estimate a two-stage Heckman selection model of credit card adoption and use with a unique dataset that combines administrative data from the Equifax credit bureau and self-reported data from a representative survey of consumers. Higher-income consumers carry higher credit card balances, but they tend to repay those balances each month. Credit card revolvers have lower income and are less educated. Revolvers are twice as likely to use debit cards as credit cards for payments, but they carry much higher balances on their credit cards. The high cost of paying off credit card debt likely exacerbates existing inequalities in disposable income. Unlike the mortgage market, we find no evidence for lenders’ cutoff between subprime and prime consumers in the credit card market.

Purpose Financial inclusion is measured by the number of people who use the formal financial system and banks in particular. Limited access to formal banking services and the existence of unbanked households is a main policy concern. The authors evaluate how the use of prepaid (reloadable) debit cards by unbanked households affects financial inclusion and specifically the potential for these households to participate in the formal financial system and open a bank account. Design/methodology/approach The authors apply matching models to analyze survey data from the Federal Deposit Insurance Corporation National Survey of the Unbanked and Underbanked Households from 2009 to 2019 and evaluate how prepaid cards use affects plans to open a bank account. Findings Unbanked households who use prepaid cards are 5% less likely to open a bank account compared to the matched nonusers of prepaid cards. In addition, prepaid card users are 12% more likely to use nonbanks to transfer money/transact online and 18% more likely to have obtained loans from alternative financial services providers compared to the matched unbanked nonusers of prepaid debit cards. Originality/value No previous work has estimated the causal impact of use of prepaid cards on financial inclusion.

Many platforms that facilitate transactions between buyers and sellers charge ad valorem fees in which fees depend on the transaction price set by sellers. Given these platforms do not incur significant costs that vary with transaction prices, their use of ad valorem fees has been questioned. In this paper, using a model that connects ad valorem fees to third-degree price discrimination, we evaluate the welfare consequences of banning such fees. We find the use of ad valorem fees generally increases welfare, including for calibrated versions of the model based on data from Amazon’s marketplace and Visa’s signature debit cards.

This study investigates the relationship between cashless payments and economic growth in selected OECD countries. Using annual data from 2007 to 2016, our results indicate that: Firstly, cashless payment stimulates economic growth in OECD countries. Specifically, the growth-enhancing effect is found in debit card payment while credit card, e-money and cheque payment have no impact on economic growth; Secondly, the positive relationship between economic growth and debit card payment is robust after controlling for the effect of endogeneity, omitted variable bias and outliers. Based on the findings, this study offers some imperative policy recommendations.