Choosing How to Pay: The Influence of Home Country Habits

Abstract

Is having a foreign background a relevant factor in choosing between payment instruments in consumer point-of-sale transactions? We analyze this question using a unique diary survey in which both participants with a Dutch and a foreign background documented their daily purchases. Payment habits acquired in home countries continue to affect the mode of payment after migration. First generation migrants born in cash-oriented economies are more likely to use cash in point-of-sale transactions. However, the second-generation has similar payment habits as individuals with a Dutch background. This finding suggests that payment behavior is not passed on from generation to generation, but molded by host country payment habits. Finally, we suggest that special information campaigns to increase debit card usage will not have clear net social benefits.