Anneke Kosse is a Principal Researcher in the Financial Stability Department of the Bank of Canada. Her work focuses on behavior, liquidity usage and risks in payment systems. Prior to this position, Anneke worked as a Senior Policy Advisor and Researcher at the Market Infrastructures Policy department of the Nederlandsche Bank (Dutch Central Bank), and as a Principal Researcher at the Currency Department of the Bank of Canada. Anneke received her Ph.D in Business and Economics from Tilburg University. Her Ph.D thesis focused on “Digitalization of Retail Payments”.
Merchants universally accept cash. Consumers widely hold cash but also carry debit and credit cards. The cost of using a method of payment has only a small influence on which method consumers use. Large merchants accept all payments, while only two-thirds of small and medium-sized businesses accept credit cards. Merchants report that credit cards are the costliest payment method compared with cash and debit cards. However, costs are not the only consideration. Merchant acceptance of credit accounts for the many con-sumers that want to use credit cards. This interaction between consumers and merchants is known as network externalities.
Using data from our 2014 cost-of-payments survey, we calculate resource costs for cash, debit cards and credit cards. For each payment method, we examine the total cost incurred by consumers, retailers, financial institutions and infrastructures, the Royal Canadian Mint and the Bank of Canada.
We measure consumers’ use of cash by harmonizing payment diary surveys from seven countries. The seven diary surveys were conducted in 2009 (Canada), 2010 (Australia), 2011 (Austria, France, Germany and the Netherlands), and 2012 (the United States).