The Safety of Cash and Debit Cards

The Safety of Cash and Debit Cards: A Study on the Perception and Behavior of Dutch Consumers∗

Anneke Kosse

Cash and Payment Systems Division, De Nederlandsche Bank This paper investigates the impact of the perceived payment safety on debit card and cash usage. It provides a conceptual framework of safety perception and payment behavior, which is empirically tested using 2008 consumer survey data. The results show that consumers’ payment preferences are strongly influenced by their views on the safety of payment instruments. These views are determined mainly by consumers’ perception of the likelihood that payment incidents may occur. The seriousness of possible incidents is also considered, though to a much lesser degree. Personal characteristics and experiences of payment incidents are shown to play a significant role here. JEL Codes: C42, D12, E41.

1.

Introduction

Debit cards have grown rapidly into widely used payment instruments at points of sale (POS) in the Netherlands since their introduction in the late 1980s. In 2010, around 58 percent of total sales and 32 percent of total transactions were paid by debit card versus 38 percent and 65 percent in cash (Jonker, Kosse, and Hernand´z e 2012). The increasing acceptance and usage of the debit card has

∗ The views expressed in this paper are the author’s and do not necessarily reflect those of De Nederlandsche Bank or the European System of Central Banks. All errors are the author’s. The author would like to thank John Williams (the editor), an anonymous referee, Wilko Bolt, Hans Brits, Nicole Jonker, Maarten van Rooij, and Federica Teppa, as well as seminar and conference participants at various institutions for useful guidance, comments, and discussions, which greatly improved the paper. Author e-mail: j.c.m.kosse@dnb.nl.

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International Journal of Central Banking

December 2013

made it progressively susceptible to fraud—in particular, skimming fraud.1 Total skimming losses have...