The Economics of Bill Payments: An Empirical Analysis∗

The growing economic literature dedicated to payment instruments mainly focus on payments at point of sale. Yet, credit transfers and direct debits used in bill payments are much more used in the Euro area than checks, payments cards and other payment instruments. The main objective of this paper is therefore to verify whether the stan-dard framework stated for payments at point of sale is relevant to study the economics of bill payments. Using an original data set, we show that the main predictions of the standard model do not hold. First, consumers do not seem to be sensitive to transaction costs in bill payments and second, the transaction size does not influence the choice of the payment instruments. These results argue for a new the-oretical framework to analyze the use of payment instruments in bill payments. Key Words: Payment Instruments, bill payments. JEL Classification: E17. ∗This research benefited from financial support from the Groupement des Cartes Ban-caires "CB". We thank Yves Randoux for his support