Going Cashless: Government’s Point Reward Program vs. COVID-19
Using credit card transaction data, we examine the impacts of two successive events that promoted cashless payments in Japan: the government’s program and the COVID19 pandemic. We find that the number of card users was 9-12 percent higher in restaurants that participated in the program than those that did not. We present a simple framework accounting for the spread of cashless payments. Our model predicts that the impact of the policy intervention diminished as the use of cashless payments increased, which accords well with Japan’s COVID-19 experience. The estimated impact of COVID-19 was around two-thirds of that of the program.
The share of payments using cashless methods is much lower in Japan than many other countries. BIS statistics, for example, show that total payments via cashless means such as credit cards, debit cards, and e-money in Japan amounted to 74 trillion yen or 24 percent of household final consumption expenditure in 2018. This percentage is considerably lower than the 40 percent or more in other developed countries such as the United States, the United Kingdom, and Singapore. The social cost of relying on cash payments is substantial. For instance, using data for several European countries, Schmiedel et al. (2012) show that the unit cost of cash payments is higher than that of debit card payments. In addition, Rogoff (2015) argues that cash makes transactions anonymous, which potentially facilitates underground or illegal activities and leads to law-enforcement costs.