Fed paper looks at ATM’s influence in decisions about cash use

 In News

The Federal Reserve Bank of Atlanta has published How the ATM Affects the Way We Pay, a working paper that examines the influence of the ATM on consumers’ use of cash.

The paper begins with the observation that cash users today withdraw money from ATMs to finance their cash payments, and that most ATMs in the United States dispense banknotes in multiples of $20 bills.

According to an executive summary of the working paper:

The paper first constructs a consumer’s optimization model showing how the precise denomination of dollar bills available from ATMs affects consumers’ decision whether to pay with cash or with cards. 

Then, the paper uses various statistical techniques to conduct empirical analyses of consumers who choose to pay cash for transactions below a certain threshold payment amount and pay with cards for transactions exceeding that threshold. 

Download the complete FRB Atlanta working paper.

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