Use of Electronic Payment Instruments and Effect on Cash Management: A Micro Analysis

The emergence of innovative electronic payment modes in the financial sector has changed the payment dynamics of transactions across countries. The two important modes of card payments offered by the commercial banks are the debit and credit cards in India. This study is an attempt to examine at the micro level the Baumol Tobin model of demand for money in light of the adoption of electronic payment instruments via debit and credit cards among the select households of Coimbatore City for 2017. The estimated results revealed that from across the range of transactions, more than 50 per cent of the respondents chose the mode of cash payment for values lesser than 10, 000. This indicated that cash was preferred more in the case of low-value transactions. Garrett's Ranking technique was used to find the impact of usage of debit and credit cards on the financial parameters of the respondents. The results showed that among the respondents usage of debit and credit cards had the highest impact on the “level of indebtedness”, which indicated that the usage of cards for retail purchases substituted cash significantly.