An Empirical Analysis of Bill Payment Choices

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Research from the Bank of Canada shows that Canadians use cash for about 30 percent of their purchases in stores, restaurants and other points of sale. We know very little, however, about how Canadians pay their monthly electricity costs, rent, water and other bills. Even less is known about the factors driving consumers' behaviour when paying bills. Yet, bill payments make up a large share of total transactions in Canada.

In this paper, I examine how Canadians pay their bills, for example, with a cheque, through online banking or by automatic payment. I use a unique set of 2019 survey data collected from over 4,000 Canadians. Also, I examine why consumers use different options for paying bills. In particular, I look at how consumers’ payment choices and perceptions are influenced by demographics, financial situations, adoption of new technologies, general payment behaviour and bill type.

The key conclusion is that there is currently no single, dominant payment method for all consumers and bills. People’s bill payment choices vary with their socio-demographics, attitudes toward new technologies and in-store payment habits. Also, payment options vary widely by bill, and many consumers feel limited in their choices. This suggests that the preferences of billers might play an important role in consumers' options for bill payment. These findings are useful for policy-makers and payment service providers intending to encourage migration away from paper-based payment methods, such as cash or cheques. Indeed, further migration may depend more on the billers than on overcoming consumer resistance to new payment methods.