The economics of bill payments: an empirical analysis

Abstract

The growing economic literature dedicated to payment instruments mainly focuses on the point of sale payments. Yet, credit transfers and direct debits used in bill payments are much more used in the euro area than cheques, payment cards and other payment instruments. The main objective of this article is, therefore, to verify whether the theoretical standard framework stated for studying the choice of payment instruments at the point of sale is relevant to study bill payments. Using an original data set, we show that the main predictions of the standard model do not hold.

Keywords:

• payment instruments
• bill payments

JEL Classification:

• E4

Acknowledgements

This research has benefited from the financial support from the Groupement des Cartes Bancaires ‘CB’. We thank Yves Randoux for his support.

Notes

¹According to the European Central Bank, the average value per transaction amounts to €12 411 for the year 2004 for credit transfers and 434.6 for direct debits compared with 55.9 for card payments.

²In this table, we exclude monthly payments because in France this solution is a bundle that associates a fixed amount per month and a mandatory payment by direct debit. In this case, consumers have no choice to use an alternative payment instrument (cheques, etc.).

³See the Appendix for a detailed description of the variables.

⁴The frequencies are: daily, once a week, once every 2 weeks, once a month and less than once a month.