The Use of Card Payment Instruments : A Panel Data Approach

Abstract: The rapid growth in the use of non-cash payment instruments, specifically debit and credit cards, has become a prominent feature of modern economies. With an interest in the explanation of this phenomenon and differences in use across countries, we apply a model of payment instrument use to model the relationship between the dependent variables (total volume of card transactions, debit card transactions, and credit card transactions) and the five independent variables based on income, infrastructure, substitution, and institutional influences. We estimate the model and perform a regression analysis on a panel of 22 countries over the period 2009 to 2013. We find that crime, bank concentration, and income have positive relationship with the use of card instruments, while cash is found to be both a complement and substitute to card payments. The variable based on infrascture yields insignificant results. With the results, our purpose is to give greater insight into to the use of the card payments and the explanations for differences in use across countries.