The use of cash and debit cards as payment instruments in Colombia

Constanza Martínez Ventura


This paper studies the impact that the popularisation of debit cards has had on the payment preferences of retail banking clients with deposit accounts in Colombia. To this end, simultaneous equation models are used to analyse the usual payments and retail purchases of non-durable goods that these people execute in person, as a function of macroeconomic variables, the payments infrastructure, and idiosyncratic variables. The results underline the relevance of the short-term interest rate, the payments infrastructure, and the financial transaction tax on the preferences for payment instruments of this population. Particularly, it is observed that the rise in the number of point-of-sale devices has started to represent a threat to the prevalence of cash, but that idiosyncratic factors such as insecurity and informality incentivise its usage.


Money demand; debit card; transaction costs


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