Cash Substitution and Deferred Consumption as Data-Breach Harms

Using shopping diary survey data we show that changing payment patterns is a challenging task; even when consumers have fallen in love with the debit card, they find it hard to divorce from cash. While seven out of ten Dutch consumers report to prefer using the debit card, only seven out of twenty actually mostly pay by debit card. The likelihood that reported preferences and actual behaviour do not match increases with income, education and age. Consumers with payments in cash-intensive sectors, where the wide acceptance of the debit card is a relatively recent phenomenon, are more likely to overestimate debit card usage than other consumers. The likelihood of a gap also increases with the amount of cash that consumers carry with them and decreases with the average transaction size. Our findings indicate that persistent habits are an important explanation why the substitution of cash by debit cards took place at a slower pace than was expected.

Due to the financial crisis, an increasing number of households face financial problems. This may lead to an increasing need for monitoring spending and budgets. We demonstrate that both cash and the debit card are perceived as helpful in this respect. We show that, on average, consumers responsible for financial decision making within a household find cash and the debit card equally helpful for monitoring their household finances. Individuals differ in major respects, however. In particular, low earners and the liquidity-constrained prefer cash as a budgeting tool. Finally, we present evidence that at an aggregated level, such preferences strongly affect consumer payment behavior. These findings suggest that the substitution of cash by cards may slow down because of the financial crisis.

Due to the financial crisis, an increasing number of households face financial problems. This may lead to an increasing need for monitoring spending and budgets. We demonstrate that both cash and the debit card are perceived as helpful in this respect. We show that, on average, consumers responsible for financial decision making within a household find cash and the debit card equally helpful for monitoring their household finances. Individuals differ in major respects, however. In particular, low earners and the liquidity‐constrained prefer cash as a budgeting tool. Finally, we present evidence that at an aggregated level, such preferences strongly affect consumer payment behavior. These findings suggest that the substitution of cash by cards may slow down because of the financial crisis.

Due to the technological advancement in monetary sector, the payments in banking industry have undergone a remarkable transformation. The innovative products for creating payments have been developed subsequent to the privatization and globalization. Customers have showed their preference over the usage of the plastic money typically over a period of time within the banking process. Plastic money is a substitute to the cash or benchmark money. Plastic money refers to the credit cards or the debit cards that we tend to use to form purchases. Other different kinds of plastic cards provided by banks in India are ATM cards, Smart cards. This study presents a summary of the event of banking within the plastic cards usage trends since these are introduced in Indian banking sector. The study conjointly highlights the role of those cards as electronic payment tool to be employed by customers and discusses the penetration of those cards in replacement of cash and paper money. The study is carried out by taking a survey of 100 respondents by Convenient Sampling Technique from the city of Vellore by using a structured questionnaire and interview technique. The factors that influence for adoption of plastic money in substitution of cash has been identified which reflects the preference of customers towards plastic cards over paper money. Some future plans developed by different banks and institutions for avoiding the frauds arisen owing to the credit and debit cards also are mentioned in way that it depicts the image of its future growth and prospects in India.

This paper examines the effect of electronic money on the efficiency of the payment system and narrow money demand function from 2007-2017 using Indonesia monthly data. This reseacrh found that electronic money increase private consumption expenditures as a proxy of the efficiency. On the other hand, result showed that electronic money decrease narrow money (M1).Â

This paper examines the electronification of noncash payments in Finland and the extent to which noncash payment means are used as substitutes for cash. We model the processes of cash substitution and electronification of payments as 'S'-shaped learning curves and generate forecasts by extrapolating these curves. The 'S'-shaped learning curves fit the data well. Our results indicate that in Finland the cash substitution process as a whole is approaching the saturation point. Although the electronification process is clearly ongoing as regards larger-value bill payments, for small-value point-of-sale payments we seem to have reached saturation. Electronification of payments, having progressed swiftly and extensively in Finland, is already beginning to slow down. We conclude the paper with a discussion of the reasons for this turn of events and of the different factors that affect the speed of diffusion of new means of payment. Key words: payments, electronification, learning curves

We investigate how the presence of physical bank branches moderates financial technology diffusion. Our identification strategy uses services suspensions caused by criminal groups that perform hit-and-run raids exploding branch facilities and rendering them inoperable for months. We show that the shock depletes the cash inventory of branches, but the stock of credit and deposits remain unaffected. We then document that customers increase their usage of noncash payments after the events. We investigate a new instant payment technology called Pix that was a remarkable success in terms of adoption. After robbery events, the number and value of Pix intra-municipality transactions increase, as well as the number of users. We also find Pix usage spillover effects that go beyond cash substitution. First, the number of Pix transactions and users also increases when either the payer or the payee is in an unaffected municipality. Second, we show that there are local spillovers to digital institutions, indicating that cash dependence can be an impediment to their expansion. Our results shed light on the determinants of technology adoption and the consequences of the recent transition in the banking industry from a physical branch-based model to an increasing reliance on digital services.

We investigate whether small business clients could use revocable credit lines, firstly, in their cash management and, secondly, as a funding source. Since the medium-size bank that provided our unique sample has the right to call these lines and charges considerably high rates for using them, we argue that these lines are particularly suitable for managing short-term liquidity needs. From our findings on how the line terms (line availability, line limit, and charged line rate) depend on a client’s liquidity-at-risk, the duration of its relationship with the bank, and its limit overdrafts, we nonetheless conclude that these lines, although they are revocable, fulfill both purposes.

PurposeThis paper aims to examine the stock return behaviour around the bonus issue announcements in eight emerging markets for 2010–2019 by addressing the signalling, cash substitution and liquidity hypotheses.Design/methodology/approachBesides using the standard event study technique to test the presence of an anomaly, country-based regression analyses are performed. Firm-specific factors are used to understand the motive behind the anomaly observed pre- and post-announcement periods. Also, the Amihud illiquidity measure examines the liquidity hypothesis, while standardized profitability and investment ratios compare the long-run operational performance of bonus issuers to test the validity of signalling.FindingsThe findings provide evidence that abnormal returns can be detected ten days before the announcement in some countries, which is a sign of information leakage. The presence of the effect continues only in two countries after the announcement is released. The size of the bonus issue is found strongly significant in most countries, while a weak relation between abnormal return and other factors is detected. Moreover, the signalling hypothesis does not hold in the sense of long-run profitability increase, while liquidity assertion is partially presented.Research limitations/implicationsDue to an inadequate number of announcements in other emerging markets, the number of sample countries is limited by eight.Originality/valueThe research is novel regarding analyzing a wide range of emerging countries with various variables. Also, the paper is distinguished from other studies by applying multiple set of regressions under nine different event windows.

For this study, a unique sample provided by a German universal bank reveals whether small and medium-sized enterprises (SMEs) actually use bank lines of credit to substitute for cash holdings. The bank has the right to recall these lines and charges considerably higher rates for using them compared with regular loans. However, because the bank does not require any upfront commitment or usage fee, rational SMEs should demand a line, such that comparisons of the cash holdings of SMEs with and without lines as a means to detect cash substitution effects becomes inapplicable. Therefore, this study proposes an alternative test that reveals that the impact of the line rate and line limit on cash holdings and line use by SMEs is in line with the trade-off theory of cash. Moreover, SMEs' adverse behavior when using lines, their creditworthiness, and the duration of the bank-client relationship all influence the terms and conditions surrounding the lines.

This paper analyzes card payments to the retail sector in Switzerland during the COVID-19 crisis. We provide evidence on aggregate effects and regional shifts. Pronounced shifts—which persisted post-lockdown—can be observed from urban to suburban and rural areas and among cantons. Data allow us to identify directly two sources of shifts: “tourists and business travelers” and “e-commerce.” We indirectly identify additional sources: infection risk, lockdown measures, working from home, shopping tourism, and cash substitution. The COVID-19 crisis seems to have reinforced pre-existing trends that may have faster than anticipated effects on the economy. Our analysis underscores the usefulness of real-time card payment data to inform policymakers.

Cash Substitution and Deferred Consumption as Data Breach Harms

This paper discusses the Central Reserve Bank of Peru’s (BCRP)’s central bank digital currency (CBDC) pilot programme, which set out to test and evaluate retail CBDC as an instrument to promote the adoption and use of digital payments, particularly in areas of low financial inclusion. The paper shows how the BCRP developed a phased approach — encompassing research and assumption testing, with technical assistance from the International Monetary Fund. The design of the pilot is based on a hybrid model where the private sector provides user-facing services while the central bank ensures issuance, governance and oversight. A key feature of this pilot is its offline payment functionality, facilitated through a telecommunication company that operates in remote areas beyond the reach of traditional financial systems. This feature addresses the fact that many people in rural areas do not have access to smartphones. The paper highlights the quasi-experimental design of the pilot, which uses randomised district-level marketing promotions to evaluate the impact on digital payment adoption and cash substitution, among other variables. The paper provides a useful example of a practical approach that allows central banks to obtain information to evaluate the potential of digital currencies to promote access, the use of digital payments, and drive welfare gains in regions with low financial inclusion. This article is also included in The Business & Management Collection which can be accessed at https://hstalks.com/business/.

The substitution of noncash (check, giro, and credit and debit card) payments for cash transactions is difficult to gauge because there are no data series on the actual value or volume of cash transactions in any country. However, determining the degree of cash substitution is important because it will negatively affect the central banks' and governments' seigniorage revenue. We utilise a novel method for approximating the volume of cash transactions using public information on currency stocks and noncash payments. Applying this method, we estimate how cash has been substituted by other payment instruments in 10 European countries. We also provide a forecast of future cash use by country. We find that the trend in cash substitution across countries is quite similar. However, the countries themselves are at significantly different stages of this substitution process. The spread of debit and credit card payments has been the key factor behind the substitution away from cash as use of e-cash innovation is still in its infancy. Country-specific differences in the substitution process are largely explained by differences in the level of implementation of each country's card payment technology.

This paper examines the electronification of noncash payments in Finland and the extent to which noncash payment means are used as substitutes for cash. We model the processes of cash substitution and electronification of payments as 'S'-shaped learning curves and generate forecasts by extrapolating these curves. The 'S'-shaped learning curves fit the data well. Our results indicate that in Finland the cash substitution process as a whole is approaching the saturation point. Although the electronification process is clearly ongoing as regards larger-value bill payments, for small-value point-of-sale payments we seem to have reached saturation. Electronification of payments, having progressed swiftly and extensively in Finland, is already beginning to slow down. We conclude the paper with a discussion of the reasons for this turn of events and of the different factors that affect the speed of diffusion of new means of payment. Key words: payments, electronification, learning curves