Over the past 20 years, there has been a major shift away from the use of paper-based retail payment instruments, such as cash and cheques, toward electronic means of payment, such as debit cards and credit cards. Recent Bank of Canada research on consumers’ choice of payment instruments indicates that cash is frequently used for transactions with low values because of its speed, ease of use and wide acceptance, while debit and credit cards are more commonly used for transactions with higher values because of perceived attributes such as safety and record keeping. While innovations in retail payments currently being introduced into the Canadian marketplace could lead to a further reduction in the use of cash over the longer term, the implications for the use of cash of some of the structural and regulatory developments under way are less clear.
November 15, 2012
November 11, 2008 In a competitive sales environment, merchants are compelled to offer consumers the option of paying for goods and services using a variety of payment methods, including cash, debit card, or credit card. Each method entails different costs and benefits to merchants. To better understand the costs of accepting retail payments, the Bank of Canada surveyed over 500 Canadian merchants and found that most consider cash the least costly. This article investigated this perception by calculating the variable costs per transaction of accepting different means of payment. The findings are that costs for each payment method vary by merchant and transaction value, with debit cards the least costly payment for a broad cross-section of merchants.