Cash, Paper, and Electronic Payments: A Cross-Country Analysis

J. OF MONEY, CREDIT, AND BANKING, November 1996

Posted: 13 May 1998

See all articles by David B. Humphrey

David B. Humphrey

Florida State University - Department of Finance

Lawrence B. Pulley

College of William and Mary - Mason School of Business

Jukka M. Vesala

Bank of Finland - Finnish Financial Supervision Authority (FIN-FSA)

Abstract

The social cost of a payment system comprises between 1% to 1.5% of GDP. This cost can be reduced if non-cash payments shift from paper to electronics since the cost of an electronic payment is estimated to be from one-third to one-half that of a paper-based transaction. We examine the use of cash and five non-cash payment instruments in 14 developed countries over 1987-1993. Our purpose is (1) to outline the current use of check, paper giro, electronic giro, credit card, and debit card payments and (2) to determine why some payment instruments are used more intensively than others, especially electronic versus paper-based payments. Standard demand theory influences (own price and income), institutional factors, and simple availability measures across countries are examined, as is the effect of habit formation. Payment substitution relationships are also estimated and indicate that checks will decline with further growth of electronic payments while the instruments that make up electronic payments will tend to expand together rather than replace one another.

JEL Classification: G29

Suggested Citation

Humphrey, David B. and Pulley, Lawrence B. and Vesala, Jukka, Cash, Paper, and Electronic Payments: A Cross-Country Analysis. J. OF MONEY, CREDIT, AND BANKING, November 1996, Available at SSRN: https://ssrn.com/abstract=7624

David B. Humphrey (Contact Author)

Florida State University - Department of Finance ( email )

Tallahassee, FL 32306-1042
United States
850-644-7899 (Phone)
850-668-6696 (Fax)

Lawrence B. Pulley

College of William and Mary - Mason School of Business ( email )

P.O. Box 8795
Williamsburg, VA 23187-8795
United States

Jukka Vesala

Bank of Finland - Finnish Financial Supervision Authority (FIN-FSA) ( email )

P.O. Box 160
FIN-00101 Helsinki
Finland

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