Behavioral drivers of intentions to use cash: UK survey evidence

Abstract Accurately forecasting the declining use of cash as a payment method, driven in part by financial innovation in payment technologies and associated social change, is important for central banks and the cash industry. To better inform such forecasts, we are the first to examine behavioral traits as exogenous drivers of payment intentions, including mental budgeting, money fungibility and loss aversion, along with trait habit and financial literacy. Using data from a survey of 2,801 UK adults we find compelling evidence these behavioral traits and financial sophistication shape cash payment intentions, with the unique influence of mental budgeting and money fungibility subsumed by other behavioral traits. We present strong evidence of a dynamic shift in how the behavioral drivers explain intentions to pay as transaction sizes increase. While trait habits form, payment intention shifts in response to exogenous shocks demonstrate payment habits are not immune to change.