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Merchant acceptance of cash and credit cards at the point of sale
Journal of Payments Strategy & Systems,
12
(2),
150-165
(2018)
Abstract
Recent data show that the use of credit cards in Canada has been increasing, while the use of cash has been declining. At the same time, only two-thirds of small or medium-sized enterprises accept credit cards. To better understand the future development of this trend, it is important to study whether a change in merchant fees will increase credit card acceptance and thus further reduce cash use. To this end, this paper calculates the level of merchant fee where a merchant would be indifferent to accepting a credit card or cash payment, using the merchant indifference test. The study finds that the results are sensitive to the underlying assumptions. The paper also discusses the key issues of applying such a methodology to Canada.
Keywords: merchant indifference test; cash; credit cards; sensitivity analysis
The full article is available to subscribers to the journal.
Author's Biography
Ben Fung is a Director in the Currency Department at the Bank of Canada. He earned his Ph.D. from the University of Western Ontario.
Kim P. Huynh is a Senior Researcher Adviser in the Currency Department at the Bank of Canada. He earned his Ph.D. from Queen’s University at Kingston.
Kerry Nield was an Economist in the Currency Department at the Bank of Canada. She holds a MA in economics from Carleton University. She begins PhD studies at the University of British Columbia in the Fall 2018.
Angelika Welte is a Senior Economist in the Currency Department at the Bank of Canada. Angelika holds a PhD in Mathematics and an MA in Economics.
