Payment habits during COVID-19 : evidence from high-frequency transaction data

We investigate how the COVID-19 pandemic has changed consumers' payments habits in Canada. We rely on high-frequency data on cash withdrawals and debit card transactions from Interac Corp. and Canada's Automated Clearing Settlement System. We construct daily measures of payment habits reflecting cash usage, average transaction values, and the share of transactions in which the customer or card holder and the acquiring machine (ATM or POS) are of the same bank. Using simple dummy regressions and local projection models, we assess how these indicators of payment habits have changed with the evolution of the COVID-19 pandemic. We find evidence that during the pandemic consumers adjusted their behaviour by avoiding frequent trips for cash withdrawals and point-of-sale purchases and making fewer transactions for higher amounts. They also made smaller-value cash withdrawals compared with the value of card payments, which could reflect a reduced use of cash for point-of-sale transactions. Consumers also made relatively more withdrawals from ATMs that are linked to their financial institution (on-us transactions). Finally, we highlight that estimates of economic activity based on card data alone could be biased if shifts in payment habits are not taken into account. We estimate that debit card payments might have overstated consumer expenditure growth by up to 7 percentage points over the course of the pandemic.