Payment Habits During Covid-19: Evidence from High-Frequency Transaction Data

Abstract: The Covid-19 pandemic, in Canada and around the world, accelerated trends toward non-cash payments. In this paper, we assess the impact of high-frequency fluctuations in the severity of the pandemic on payment behaviour. These fluctuations are measured by daily changes in restrictions (“stringency”) and reported case counts. Our main measures of payment habits are the ratios of the value and transaction counts of cash withdrawals to debit card payments. Econometrically, we use local projections to estimate the effects on payment habits. We find evidence that consumer behaviour adjusted during the pandemic: consumers withdrew less cash relative to card payment and avoided frequent trips for cash withdrawals and point-of-sale purchases through higher transaction amounts. Based on our modelling, once stringency measures eased and case counts receded, cash use partially recovered, although not to pre-pandemic levels.