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Technology Adoption and Consumer Payments: Evidence from Survey Data

The Review of Network Economics

Vol. 2, Issue 2 - June 2003, pp 175-190.

  Fumiko Hayashi
Payments System Research, Federal Reserve Bank of Kansas City

E-mail: [email protected]

Elizabeth Klee
Division of Reserve Bank Operations and Payment Systems, Board of Governors of the Federal Reserve System

  Consumers pay for hundreds of goods and services each year, but across households and across goods, consumers do not choose to pay the same way. This paper posits that payment choices depend in part on consumers' propensity to adopt new technologies and in part on the nature of the transaction. To test this hypothesis, this paper analyzes consumer's payment instrument use at the point of sale and for bill payment. The sample includes consumers surveyed in 2001, who are primarily users of the Internet. The results indicate that consumers who use new technology or computers are more likely to use electronic forms of payment, such as debit cards and electronic bill payments. Particularly, the use of direct deposit is a significant predictor of electronic payment use. Furthermore, the results indicate that payment choice depends on the characteristics of the transaction, such as the transaction value, the physical characteristics of the point of sale, and a bill's frequency and value variability.

Keywords: payment instruments, point of sale, bill payment, electronic payments

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