Frontier policy issues in consumer payment behaviour

Abstract

Since the mid-1990s, the US payment system has been undergoing a transformation, featuring a significant decline in the use of paper payment methods — cheques and cash — and increasing popularity of cards and electronic payments. As a consequence of this transformation, new and largely unexplored policy issues have surfaced with implications for consumer welfare. Who adopts new technology and why? Do consumers manage their finances in an optimal way, given their increased reliance on credit? And for consumers who continue to rely on the traditional financial instruments, what options do they have when their bank accounts are closed involuntarily? This paper reviews some of the most important current policy issues in consumer payments, focusing on banking and payment cards.