Consumer heterogeneity and the use of cashless payments in Japan in 2007–2020: a latent class approach
DOI:
https://doi.org/10.22394/1993-7601-2024-75-33-53Keywords:
безналичные платежи, ненаблюдаемая неоднородность, латентные классы, смесь распределений, модели упорядоченного выбораAbstract
The paper exploits ordered choice logit models with latent classes to account for unobservable consumer heterogeneity in analyzing the preferences for cashless payments in Japan for purchases of different sizes. Using the data of the Survey of Household Finance (2007–2020), we discover that consumers separate into classes of more and less frequent users of cashless payments for each category of purchases. The probability of belonging to the former class is positively related to the fact of consumer taking measures for the protection of their financial assets. The results reveal a statistically different effect of consumer socio‐demographic characteristics (sex, age, income, employment, education, household size), the binary variable for residence in a large city and Kanto region, and the dummies for 2019 and 2020 on the choice of cashless payments in the two latent classes.Agencies
The article was prepared within the framework of the Basic Research program at HSE University.Downloads
References
Bagnall J., Bounie D., Huynh K. P., Kosse A., Schmidt T., Schuh S. D., Stix H. (2014). Consumer cash usage: A cross-country comparison with payment diary survey data. De Nederlandsche Bank Working Paper No. 422. DOI: 10.2139/ssrn.2446786.
Bago d'Uva T. (2005). Latent class models for use of primary care: Evidence from a British panel. Health Economics, 14 (9), 873–892. DOI: 10.1002/hec.1047.
Baudat S., Henchoz C. (2023). Money in one click: Inequalities in digital financial practices and digital skills among emerging adults in Switzerland. Journal of Family and Economic Issues, 44, 602–618. DOI: 10.1007/s10834-022-09854-z.
Besstremyannaya G. (2015). Heterogeneous effect of coinsurance rate on healthcare expenditure: Generalized finite mixtures and matching estimators. Applied Economics, 47 (58), 6331–6361. DOI: 10.1080/00036846.2015.1071470.
Besstremyannaya G. (2017). Measuring income equity in the demand for healthcare with finite mixture models. Applied Econometrics, 46 (2), 5–29.
Bhatnagar A., Ghose S. (2004). A latent class segmentation analysis of e-shoppers. Journal of Business Research, 57 (7), 758–767. DOI: 10.1016/S0148-2963(02)00357-0.
Blundell R., Stoker T. M. (2007). Models of aggregate economic relationships that account for heterogeneity. In: Heckman J. J. and Leamer E. E. (eds.), Handbook of Econometrics, vol. 6, 4609–4666. Elsevier, Amsterdam. DOI: 10.1016/S1573-4412(07)06068-0.
Bounie D., François A. (2006). Cash, check or bank card? The effects of transaction characteristics on the use of payment instruments. Telecom Paris Economics and Social Sciences Working Paper No. ESS-06-05. DOI: 10.2139/ssrn.891791.
Brooks C. (2019). Introductory econometrics for finance. Cambridge University Press, Cambridge, UK. DOI: 10.1017/9781108524872.
Browning M., Hansen L. P., Heckman J. J. (1999). Micro data and general equilibrium models. In: Taylor J. B. and Woodford M. (eds.), Handbook of Macroeconomics, vol. 1, 543–633. Elsevier, Amsterdam. DOI: 10.1016/S1574-0048(99)01011-3.
Cameron A. C., Trivedi P. K. (2013). Regression analysis of count data. 2nd ed. Cambridge University Press, Cambridge, UK. DOI: 10.1017/CBO9781139013567.
Cashless Promotion Council (2021). Kyasshuresu rōdomappu 2021 (Cashless roadmap 2021). Payments Japan Publication. https://paymentsjapan.or.jp/wp-content/uploads/2022/02/roadmap2021.pdf (in Japanese).
Clogg C. C. (1981). Latent structure models of mobility. American Journal of Sociology, 86 (4), 836–868. DOI: 10.1086/227319.
Cohen M. A., Rysman M. (2013). Payment choice with consumer panel data. FRB of Boston Working Paper No. 13-6. DOI: 10.2139/ssrn.2308121.
Compiani G., Kitamura Y. (2016). Using mixtures in econometric models: A brief review and some new results. The Econometrics Journal, 19 (3), C95–C127. DOI: 10.1111/ectj.12068.
Cwynar A., Świecka B., Filipek K., Porzak R. (2022). Consumers' knowledge of cashless payments: Development, validation, and usability of a measurement scale. Journal of Consumer Affairs, 56 (2), 640–665. DOI: 10.1111/joca.12424.
Deb P., Trivedi P. K. (1997). Demand for medical care by the elderly: A finite mixture approach. Journal of Applied Econometrics, 12 (3), 313–336. DOI: 10.1002/(SICI)1099-1255(199705)12:3<313::AID-JAE440>3.0.CO;2-G.
Everitt B., Hand D. (1981). Mixtures of discrete distributions. Springer Netherlands, Dordrecht. DOI: 10.1007/978-94-009-5897-5.
Fujiki H. (2019). How do we choose to pay using evolving retail payment technologies? Some additional results from Japan. TCER Working Paper Series No. E-135. Tokyo Center for Economic Research. https://www.tcer.or.jp/wp/pdf/e135.pdf.
Fujiki H. (2020a). Cash demand and financial literacy: A case study using Japanese survey data. Japan and the World Economy, 54, 100998. DOI: 10.1016/j.japwor.2020.100998.
Fujiki H. (2020b). The use of noncash payment methods for regular payments and the household demand for cash: Evidence from Japan. The Japanese Economic Review, 71 (4), 719–765. DOI: 10.1007/s42973-020-00049-5.
Fujiki H. (2022a). Household financial services, financial literacy, and COVID-19 pandemic. Applied Economics Letters, 29 (7), 615–618. DOI: 10.1080/13504851.2021.187809.
Fujiki H. (2022b). Will the widespread use of cashless payments reduce the frequency of the use of cash payments? Review of Economic Analysis, 14 (1), 89–120. DOI: 10.15353/rea.v13i3.4522.
Fujiki H. (2023a). Attributes needed for Japan's central bank digital currency. The Japanese Economic Review, 74 (1), 117–175. DOI: 10.1007/s42973-021-00106-7.
Fujiki H. (2023b). Cashless payment methods and COVID-19: Evidence from Japanese consumer panel data. The Japanese Economic Review, 10. DOI: 10.1007/s42973-023-00141-6.
Fujiki H., Tanaka M. (2017). Choice of payment instrument for low-value transactions in Japan. In: International Cash Conference 2017 — War on Cash: Is There a Future for Cash? 25–27 April 2017, Island of Mainau. https://www.econstor.eu/handle/10419/162909.
Gorshkov V. A. (2021). The specificity of Japan's cashless payments and the impact of the COVID-19 pandemic. Regionalistika, 8 (5), 44–56. DOI: 10.14530/reg.2021.5.44.
Greene W. H. (2007). LIMDEP 9.0. Econometric modeling guide. Econometric Software, Inc., Plainview, NY.
Greene W. H. (2012a). Econometric analysis. 7th ed. Pearson Education, Edinburgh Gate, Harlow, UK.
Greene W. H. (2012b). LIMDEP 10. Econometric modeling guide. Econometric Software, Inc., Plainview, NY.
Greene W. H. (2012c). LIMDEP 10. Reference guide. Econometric Software, Inc., Plainview, NY.
Hagenaars J. A., McCutcheon A. L. (eds.) (2002). Applied latent class analysis. Cambridge University Press, Cambridge, UK. DOI: 10.1017/CBO9780511499531.
Harrison T. S. (1994). Mapping customer segments for personal financial services. International Journal of Bank Marketing, 12 (8), 17–25. DOI: 10.1108/02652329410069010.
Heathcote J., Storesletten K., Violante G. L. (2009). Quantitative macroeconomics with heterogeneous households. NBER Working Paper w14768. https://www.nber.org/system/files/working_papers/w14768/w14768.pdf.
Huston S. J. (2010). Measuring financial literacy. Journal of Consumer Affairs, 44 (2), 296–316. DOI: 10.1111/j.1745-6606.2010.01170.x.
Ishigaki T., Takenaka T., Motomura Y. (2011). Nichijō kōbai kōdō ni kansuru ōkibo dēta no yūgō ni yoru kokyaku kōdō yosoku shisutemu (Customer behavior prediction system based on the fusion of large-scale data on daily purchasing behavior). Journal of the Society for Artificial Intelligence, 26 (6), 670–681. DOI: 10.1527/tjsai.26.670 (in Japanese).
Jones A. M., Rice N., d'Uva T. B., Balia S. (2007). Applied health economics. Routledge, London, New York. DOI: 10.4324/9780203972304.
Kolesnikov Y. (2015). Ponyatiye elektronnykh deneg po zakonodatel'stvu Rossii i zarubezhnykh stran (Concept of electronic money in legislation in Russia and foreign countries). Probely v rossiyskom zakonodatel'stve. Yuridicheskiy zhurnal, 2, 187–191 (in Russian).
Koulayev S., Rysman M., Schuh S., Stavins J. (2016). Explaining adoption and use of payment instruments by US consumers. The RAND Journal of Economics, 47 (2), 293–325. DOI: 10.1111/1756-2171.12129.
Kumar R., O'Brien S. (2019). 2019 findings from the diary of consumer payment choice. Federal Reserve Bank of San Francisco. https://www.frbsf.org/cash/publications/fed-notes/2019/june/2019-findings-from-the-diary-of-consumer-payment-choice/.
Lawson R., Todd S. (2003). Consumer preferences for payment methods: A segmentation analysis. International Journal of Bank Marketing, 21 (2), 72–79. DOI: 10.1108/02652320310461456.
Liu P., Yamashita H., Iwanaga J., Taruishi M., Goto M. (2018). Gurumesābisu ni okeru resutoran suisen tōkō e no riakushon-sū zōka o mokuteki to shita senzai kurasu moderu bunseki (An analysis model based on latent class models to increase reactions to restaurant recommendation on social gourmet service). Journal of the Information Processing Society of Japan, 59 (1), 211–226. http://id.nii.ac.jp/1001/00185285/ (in Japanese).
Machauer A., Morgner S. (2001). Segmentation of bank customers by expected benefits and attitudes. International Journal of Bank Marketing, 19 (1), 6–18. DOI: 10.1108/02652320110366472.
Magnus J. R., Katyshev P., Peresetsky A. (2021). Ekonometrika. Nachal'nyi kurs (Econometrics. A first course). 9th ed. Delo, Moscow (in Russian).
Mallat N. (2007). Exploring consumer adoption of mobile payments — A qualitative study. The Journal of Strategic Information Systems, 16 (4), 413–432. DOI: 10.1016/j.jsis.2007.08.001.
McLachlan G., Peel D. (2000). Finite mixture models. Wiley, New York. DOI: 10.1002/0471721182.
Ministry of Economy, Trade and Industry (2018). Kyasshuresu bijon (Cashless vision). METI Policy Paper. https://www.hkd.meti.go.jp/hokir/cashless/data/cl_vision.pdf (in Japanese).
Nakata M. (2011). Shōgaku kessai shudan no sentaku yōin: Shōhisha-muke paneruankēto chōsa ni yoru jisshō bunseki (Factors for selecting small payment methods: Empirical analysis using a consumer panel survey). Kyushu University Discussion Paper Series, 7 (3). DOI: 10.15017/19505 (in Japanese).
Nishimura Y. (2019). Kyasshuresu Kokka "Chūgoku Shin Keizai" No Hikatokage (Cashless Nation: Lights and Shadows of "China's New Economy"). Bungeishunju, Tokyo (in Japanese).
Rysman M. (2007). An empirical analysis of payment card usage. The Journal of Industrial Economics, 55 (1), 1–36. DOI: 10.1111/j.1467-6451.2007.00301.x.
Schennach S. M. (2020). Mismeasured and unobserved variables. In: Durlauf S. N., Hansen L. P., Heckman J. J., and Matzkin R. L. (eds.), Handbook of Econometrics, vol. 7, 487–565. Elsevier, Amsterdam. DOI: 10.1016/bs.hoe.2020.07.001.
Sekine T., Shoji T., Watanabe T. (2021). Going cashless: Evidence from Japan's point reward program. Working Papers on Central Bank Communication 036. University of Tokyo, Graduate School of Economics. https://ideas.repec.org//p/upd/utmpwp/036.html.
Shimizu R., Yamashita H., Ueda M., Tanaka R., Tachibana T., Goto M. (2020). Latent variable models for integrated analysis of credit and point usage history data on rewards credit card system. International Business Research, 13 (3), 106–117. DOI: 10.5539/ibr.v13n3p106.
Silva J. M. S., Windmeijer F. (2001). Two-part multiple spell models for health care demand. Journal of Econometrics, 104 (1), 67–89. DOI: 10.1016/S0304-4076(01)00059-8.
Stavins J. (2018). Consumer preferences for payment methods: Role of discounts and surcharges. Journal of Banking and Finance, 94, 35–53. DOI: 10.1016/j.jbankfin.2018.06.013.
Świecka B., Terefenko P., Wiśniewski T., Xiao J. (2021). Consumer financial knowledge and cashless payment behavior for sustainable development in Poland. Sustainability, 13 (11), 6401. DOI: 10.3390/su13116401.
Takemura T. (2019). Nihon ni okeru shōhisha no kyasshuresu-ka ni kansuru jisshō kenkyū (Empirical research on consumer cashless payments in Japan). In: Japan Post Asset Research: Collection of Research Grant Papers, vol. 26, 125–155. https://www.yu-cho-f.jp/wp-content/uploads/6takemura2019.pdf (in Japanese).
Takemura T., Kozu T., Takeda K., Suehiro T. (2018). Analysis on spread of fintech service by areas in Japan and generation: Case of QR code settlement service. Saga University Working Paper No. FY2018-01. http://www.eco.saga-u.ac.jp/file/CRES-WP_FY2018-01.pdf.
Wedel M., DeSarbo W. (2002). Mixture regression models. In: Hagenaars J. A. and McCutcheon A. L. (eds.), Applied Latent Class Analysis, 366–370. Cambridge University Press. DOI: 10.1017/CBO9780511499531.014.
