1 Competing Technologies for Payments and the Demand for Currency

Abstract: The shift from paper-based towards electronic-based payment instruments is following a slow path in many developed countries which can be, at least partially, due to the over time overlapping objectives of banks in deploying ATMs and POS devices. We employ a unique database to explore these issues. The results suggest that the promotion of cards relative to cash is diminished by the co-existence of these two rival technologies. Additionally, POS devices and higher POS transactions are found to significantly reduce the demand for currency and to offset the effects that ATMs may have on the demand for currency (98 words). JEL Classification: G21, O33; L1