Forthcoming

Precautionary cash holding by consumers making electronic payments and risk-taking behavior

Authors

DOI:

https://doi.org/10.24136/eq.3073

Keywords:

demand for money, risk-taking, electronic payments, cashless, risky behavior

Abstract

Research background: The relative inertia in holding cash, despite the increasing importance of electronic payments, is one of the most fascinating puzzles of the current monetary system and a significant issue for central bank policy. In our study, we would like to extend the previous considerations regarding holding cash by consumers who have decided to make electronic payments but keep the cash despite this.

Purpose of the article: Recent literature mainly considers the trade-off between cash and electronic payments. We go beyond this dual framework and instead focus on the precautionary demand for cash. We study the relevance of several psychological factors behind cash holding by consumers who have decided to use electronic payments.

Methods: We employ factor analysis and logistic regression. We use data from a standardized online survey conducted among Polish consumers.

Findings & value added: Our study's key determinants of holding cash include risk-taking behavior, perceived risk of the unavailability of the payment infrastructure and perceived attitudes towards cash (flexibility and cybersecurity related to the lack of exposure to cyberattacks). According to our research, consumers attach great importance to the flexibility that cash gives as an additional option to electronic payments. A better understanding of these motivations is crucial for public policymakers, who should strive to design payment systems that respond to the needs of all social groups. Therefore, in (at least) the short and medium term, cash will remain in circulation, even if it gradually loses its payment function.

Downloads

Download data is not yet available.

References

Acedański, J., Maciejewski, G., & Pietrucha, J. (2024). Cash holding by consumers: The role of the perceived characteristics of money. International Journal of Consumer Studies, 48(4), e13075. DOI: https://doi.org/10.1111/ijcs.13075
View in Google Scholar

Ashworth, J., & Goodhart, C.A.E. (2020). The surprising recovery of currency usage. International Journal of Central Banking, 16(3), 239–277.
View in Google Scholar

Auer, R., Cornelli, G., & Frost, J. (2020). Covid-19, cash, and the future of payments. BIS Bulletin, 3, 1–9.
View in Google Scholar

Bae, J., Joung, H., Kim, J.-Y., Kwon, K. N. Kim, Y. T., & Park, S.-W. (2010). Test-retest reliability of a questionnaire for the Korea youth risk behavior web-based survey. Journal of Preventive Medicine and Public Health, 43(5), 403–410. DOI: https://doi.org/10.3961/jpmph.2010.43.5.403
View in Google Scholar

Buelow, M. (2020). Risky decision making in psychological disorders. London: Academic Press.
View in Google Scholar

Blais, A.-R., & Weber, E. U. (2006). A domain-specific risk-taking (DOSPERT) scale for adult populations. Judgment and Decision Making, 1(1), 33–47. DOI: https://doi.org/10.1017/S1930297500000334
View in Google Scholar

Borgonovo, E., Caselli, S., Cillo, A., Masciandaro, D., & Rabitti, G. (2021). Money, privacy, anonymity: What do experiments tell us? Journal of Financial Stability, 56, 100934. DOI: https://doi.org/10.1016/j.jfs.2021.100934
View in Google Scholar

Bruno, B., & Faggini, M. (2022). The cashless man: Do preferences matter? Journal of Evolutionary Economics, 32, 1525–1544. DOI: https://doi.org/10.1007/s00191-022-00775-6
View in Google Scholar

Cardim de Carvalho, F. J. (2010). Uncertainty and money: Keynes, Tobin and Kahn and the disappearance of the precautionary demand for money from liquidity preference theory. Cambridge Journal of Economics, 34(4), 709–725. DOI: https://doi.org/10.1093/cje/bep020
View in Google Scholar

Cestac, J., & Assailly, J. P. (2015). Culture and risk behaviors. In A. Columbus (Ed.). Advances in psychology research vol. 111 (pp. 81–103). New York: Nova Science.
View in Google Scholar

Cevik, S. (2020). Dirty money: Does the risk of infectious disease lower demand for cash? International Finance, 23(3), 460–471. DOI: https://doi.org/10.1111/infi.12383
View in Google Scholar

Deutsche Bundesbank (2018). Payment behaviour in Germany in 2017. Fourth study of the utilisation of cash and cashless payment instruments. Frankfurt: Deutsche Bundesbank.
View in Google Scholar

Dowd, K. (2019). The war on cash is about much more than cash. Economic Affairs, 39(3), 391–399. DOI: https://doi.org/10.1111/ecaf.12377
View in Google Scholar

ECB (2022). Statistical warehouse data. Retrieved from https://sdw.ecb.europa.eu/ (30.06.2022).
View in Google Scholar

ECB (2024). The Eurosystem cash strategy. Retrieved from https://www.ecb.europa.eu/euro/cash_strategy/html/index.en.html (8.04.2024).
View in Google Scholar

EC (2024). Single currency package: New proposals to support the use of cash and to propose a framework for a digital euro. Retrieved from https://ec.europa.eu/co mmission/presscorner/detail/en/ip_23_3501 (8.04.2024).
View in Google Scholar

Fenton-O’Creevy, M., & Furnham, A. (2020). Money attitudes, personality and chronic impulse buying. Applied Psychology, 69(4), 1557–1572. DOI: https://doi.org/10.1111/apps.12215
View in Google Scholar

Fenton-O’Creevy, M., & Furnham, A. (2021). Financial distress and money attitudes. Journal of Neuroscience, Psychology, and Economics, 14(3), 138–148. DOI: https://doi.org/10.1037/npe0000143
View in Google Scholar

Garratt, R. J., & van Oordt, M. R. C. (2021). Privacy as a public good: A case for electronic cash. Journal of Political Economy, 129(7), 2157–2180. DOI: https://doi.org/10.1086/714133
View in Google Scholar

Guedes, D. P., & Lopes, C. C. (2010). Validation of the Brazilian version of the 2007 youth risk behavior survey. Revista de Saúde Pública, 44, 840–850. DOI: https://doi.org/10.1590/S0034-89102010000500009
View in Google Scholar

GUS (2022). Macroeconomic data bank (BDM). Warsaw: Statistics Poland. Retrieved from https://bdm.stat.gov.pl. (30.06.2022).
View in Google Scholar

Jobst, C., & Stix, H. (2017). Doomed to disappear? The surprising return of cash across time and across countries. CEPR Discussion Paper Series, DP12327.
View in Google Scholar

Joseph, E. D., & Zhang, D. C. (2021). Personality profile of risk-takers: An examination of the Big Five facets. Journal of Individual Differences, 42(4), 194–203. DOI: https://doi.org/10.1027/1614-0001/a000346
View in Google Scholar

Kahn, C. (2018). Payment systems and privacy. Federal Reserve Bank of St. Louis Review, 100(4), 337–344. DOI: https://doi.org/10.20955/r.100.337-44
View in Google Scholar

Karoubi, B., Chenavaz, R., & Paraschiv, C. (2016). Consumers’ perceived risk and hold and use of payment instruments. Applied Economics, 48(14), 1317–1329. DOI: https://doi.org/10.1080/00036846.2015.1100249
View in Google Scholar

Kelley, K., Byrne, D., Przybyla, D. P. J., Eberly, C., Eberly, B., Greendlinger, V., Wan Ch. K., & Gorsky, J. (1985). Chronic self-destructiveness: Conceptualization, measurement, and initial validation of the construct. Motivation and Emotion, 9(2), 135–151. DOI: https://doi.org/10.1007/BF00991572
View in Google Scholar

Keynes, J. M. (1936). The general theory of employment, interest and money. London: Palgrave MacMillan.
View in Google Scholar

Keynes, J. M. (1937). The general theory of employment. Quarterly Journal of Economics, 51, 209–223. DOI: https://doi.org/10.2307/1882087
View in Google Scholar

Kotkowski, R., & Manikowski, A. (2023). Cash usage in Poland in 2020: Insights into the role of the COVID-19 pandemic and spatial aspects. Journal of Banking and Financial Economics, 1(19), 85–113. DOI: https://doi.org/10.7172/2353-6845.jbfe.2023.1.5
View in Google Scholar

Kotkowski, R., & Polasik, M. (2021). COVID-19 pandemic increases the divide between cash and cashless payment users in Europe. Economics Letters, 209, 110139. DOI: https://doi.org/10.1016/j.econlet.2021.110139
View in Google Scholar

Krueger, M., & Seitz, F. (2018). Pros and cons of cash: The state of the debate. Credit and Capital Markets – Kredit und Kapital, 51(1), 15–40. DOI: https://doi.org/10.3790/ccm.51.1.15
View in Google Scholar

Liébana-Cabanillas, F., Muñoz-Leiva, F., & Sánchez-Fernández, J. (2013). The impact of risk on the technological acceptance of mobile payment services. Global Business Perspectives, 1(4), 309–328. DOI: https://doi.org/10.1007/s40196-013-0020-9
View in Google Scholar

Liñares-Zegarra, J. M., & Willesson, M. (2021). The effects of negative interest rates on cash usage: Evidence for EU countries. Economics Letters, 198, 109674. DOI: https://doi.org/10.1016/j.econlet.2020.109674
View in Google Scholar

Liang, S., Fan, P., & Yang, G. (2023). To take a risk or not? The effect of perceived scarcity on risky choices. Behavioral Sciences, 13(9), 743. DOI: https://doi.org/10.3390/bs13090743
View in Google Scholar

Maciejewski, G. (2012). Perceived risk in purchasing decisions of the polish consumers – Model-based approach. Journal of Economics & Management, 8, 37–52.
View in Google Scholar

Maison, D. (2019). The psychology of financial consumer behavior. Cham: Springer International Publishing. DOI: https://doi.org/10.1007/978-3-030-10570-9
View in Google Scholar

Oehler, A., Horn, M., & Wendt, S. (2023). The trust risk puzzle: The impact of trust on the willingness to take financial risk. Quarterly Journal of Finance, 13(03), 2350006. DOI: https://doi.org/10.1142/S2010139223500064
View in Google Scholar

Oney, E., Oksuzoglu Guven, G., & Hussain Rizvi, W. (2017). The determinants of electronic payment systems usage from consumers’ perspective. Economic Research - Ekonomska Istraživanja, 30(1), 394–415. DOI: https://doi.org/10.1080/1331677X.2017.1305791
View in Google Scholar

Osborne, J. W., Costello, A. B., & Kellow, J. T., (2008). Best practices in exploratory factor analysis. In J. W. Osborne (Ed.). Best practices in quantitative methods (pp. 86–99). Thousand Oaks, CA: SAGE Publications Inc.. DOI: https://doi.org/10.4135/9781412995627.d8
View in Google Scholar

Peplińska, A., Wyszomirska-Góra, M., Połomski, P., & Szulc, M. (2015). Who is a dangerous driver? Socio-demographic and personal determinants of risky traffic behavior. Current Issues in Personality Psychology, 3(3), 149–158. DOI: https://doi.org/10.5114/cipp.2015.53580
View in Google Scholar

Pietrucha, J. (2021). Drivers of the cash paradox. Risks, 9(12), 227. DOI: https://doi.org/10.3390/risks9120227
View in Google Scholar

Pietrucha, J., & Gulewicz, M. (2022). Uncertainty and cash during a pandemic: The case of Poland. Ruch Prawniczy, Ekonomiczny i Socjologiczny, 84(3), 133–153. DOI: https://doi.org/10.14746/rpeis.2022.84.3.09
View in Google Scholar

Rogoff, K. S. (2016). The curse of cash. Princeton: Princeton University Press. DOI: https://doi.org/10.1515/9781400883219
View in Google Scholar

Roland-Lévy, C. D., Lemoine, J. E., Zaghouani, I., & Deschamps, F. (2023). Risk seeking or risk aversion?. In D. N. Tiwari (Ed.). Towards inclusive societies (pp. 63–76). London: Routledge India. DOI: https://doi.org/10.4324/9781003402213-9
View in Google Scholar

Rösl, G., & Seitz, F. (2022a). On the stabilizing role of cash for societies. IMFS Working Paper Series, 167.
View in Google Scholar

Rösl, G., & Seitz, F. (2022b). Cash demand in times of crises. Journal of Payments Strategy & Systems, 16(2), 107–119. DOI: https://doi.org/10.69554/BFOI8360
View in Google Scholar

Ruggeri, K., Friedemann, M., Krawiec, J. M., Jarke, H., Quail, S. K., Paul, A. F. Folke, T. Rubaltelli, E., & Gladstone, J. J. (2021). Economic, financial, and consumer behavior. In Psychology and behavioral economics (pp. 50–70). London – New York: Routledge. DOI: https://doi.org/10.4324/9781003181873-4
View in Google Scholar

Salisbury, L. C., Nenkov, G. Y., Blanchard, S. J., Hill, R. P., Brown, A. L., & Martin, K. D. (2023). Beyond income: Dynamic consumer financial vulnerability. Journal of Marketing, 87(5), 657–678. DOI: https://doi.org/10.1177/00222429221150910
View in Google Scholar

Sciortino, J. J., Huston, J. H., & Spencer, R. W. (1987). Perceived risk and the precautionary demand for money. Journal of Economic Psychology, 8(3), 339–346. DOI: https://doi.org/10.1016/0167-4870(87)90027-4
View in Google Scholar

Sheedy, E., & Griffin, B. (2018). Risk governance, structures, culture, and behavior: A view from the inside. Corporate Governance: An International Review, 26(1), 4–22. DOI: https://doi.org/10.1111/corg.12200
View in Google Scholar

Shy, O. (2023). Cash is alive: How economists explain holding and use of cash. Journal of Economic Literature, 61(4), 1465–1520. DOI: https://doi.org/10.1257/jel.20221632
View in Google Scholar

Studenski, R. (2012). Risk propensity, absent-mindedness and depression versus involvement in accidents. Polish Psychological Bulletin, 43(4), 333–343. DOI: https://doi.org/10.2478/v10059-012-0035-0
View in Google Scholar

Titova, Y., Cornea, D., & Lemeunier, S., (2021). What factors keep cash alive in the European Union? De Economist, 169, 291–317. DOI: https://doi.org/10.1007/s10645-021-09384-3
View in Google Scholar

Trinh, H. N., Tran, H. H., & Vuong, D. H. Q. (2020). Determinants of consumers’ intention to use credit card: A perspective of multifaceted perceived risk. Asian Journal of Economics and Banking, 4(3), 105–120. DOI: https://doi.org/10.1108/AJEB-06-2020-0018
View in Google Scholar

Znajmiecka-Sikora, M., & Sałagacka, M. (2022). Analysis of the relationship between psychological gender and risk perception style and attitudes towards safety in a group of women and men. International Journal of Occupational Safety and Ergonomics, 28(1), 364–375. DOI: https://doi.org/10.1080/10803548.2020.1760527
View in Google Scholar

Downloads

Published

02-08-2024

Issue

Section

Articles

How to Cite

Pietrucha, J., & Maciejewski, G. (2024). Precautionary cash holding by consumers making electronic payments and risk-taking behavior. Equilibrium. Quarterly Journal of Economics and Economic Policy. https://doi.org/10.24136/eq.3073

Similar Articles

1-10 of 126

You may also start an advanced similarity search for this article.