Abstract
Understanding the demand for cash and noncash payment methods is an important policy concern in Japan, as the Japanese government aims at a cashless economy. Previous studies show that the demand for specific payment methods depends not only on the motivations of the kind of transactions, such as day-to-day transactions or hoarding, but also on payment contexts, such as bill payments or online payments. However, a few studies have investigated the demand for payment methods by payment context in Japan. We fill this gap by examining Japanese family and single-person household data on the choice of cash and noncash payment methods for regular payments, including bill payments. We found a decreasing popularity of choices involving automatic withdrawals and an increasing popularity of choices involving credit cards in both data sets and that of choosing exclusively cash in the single-person households’ data. We also found that these changes are associated with a decreasing demand for cash in family households and, conversely, an increasing demand in single-person households, assuming that the current pace of gradual adoption of noncash payment methods continues. In promoting a cashless society, the Japanese government should pay attention to the finding that a more frequent use of credit cards for regular payments is not always associated with a decrease in the demand for cash.
Highlights
1.1 Background, motivation, and major resultsIn this paper, we examine the use of noncash payment methods with a special attention to regular payments in Japan
We identify a gradual shift from automatic withdrawals to credit cards for regular payments in the family household data, which is unique within the electronic payment methods observed in Japan
Do the choices of AW, Card, or Cash relate to some demographic variables? To respond, Table 4 details the average cash holdings, Disposable income, The amount of financial assets, age of the household heads (Age), dummy variables for respondents who know the Deposit Insurance Corporation of Japan and its role and who have heard about it (Know_Dep_Ins and Heard_Dep_Ins), dummy variables for those who place an emphasis on lower service charges and online banking services offered via the Internet when selecting a financial institution (Lower_service_charge and Online_banking, respectively), and dummy variables for those who are self-employed and without a job (Self_employed and No_job, respectively) by the choice of six regular payment methods
Summary
We examine the use of noncash payment methods with a special attention to regular payments in Japan. Japan is somewhat unique in that its consumers successfully adopted bank account transfers or automatic withdrawal (an arrangement where a depositor will grant permission to companies to take payments from the depositor’s bank account automatically and regularly, say once a month) as early as the 1970s (note that unlike the US, the Japanese do not use personal checks) It is worthwhile for an empirical payment economist to investigate the slow adoption of electronic payment methods (the flipside of the coin is the persistent usage of cash) using Japanese data to facilitate cross-country comparison, not least with the US. As a US example, according to the 2018 SCPC, 98%, 78%, 97%, and 80% of consumers (see Table 2 in Foster et al (2019)) adopt cash, check, card (debit, credit, and prepaid), and electronic (online banking bill and bank account number payments either automatically or online) payments, respectively. The evidence supporting the increasing choice of cash is a unique and challenging finding
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