RDP 2015-03: The Value of Payment Instruments: Estimating Willingness to Pay and Consumer Surplus Appendix E: Model Regressors for Predictive Model

Tai Lam and Crystal Ossolinski

March 2015 – ISSN 1448-5109 (Online)

Table E1: Regressors Included in Section 6 Predictive Model
Variable category Description Comparison with Section 5 explanatory model
Payment diary
Per cent of debit card payments Percentage points, continuous between 0 and 1 Excluded
Per cent of credit card payments Percentage points, continuous between 0 and 1 Excluded
Value of debit card payments Dollar value Excluded
Value of credit card payments Dollar value Excluded
Number of surcharges paid Number Excluded
Demographic
Male Boolean Included
Age Number Included in bucketed ranges
Household income Separate dummy variables of: $1–$7,799; $7,800–$19,999; $20,000–$29,999; $30,000–$39,999; $40,000–$49,999; $50,000–$59,999; $60,000–$69,999; $70,000–$79,999; $80,000–$89,999; $90,000–$99,999; $100,000–$109,999; $110,000–$119,999; $120,000–$129,999; $130,000–$149,999; over $150,000 Reduced categories
Personal income Separate dummy variables of: $1–$7,799; $7,800–$19,999; $20,000–$29,999; $30,000–$39,999; $40,000–$49,999; $50,000–$59,999; $60,000–$69,999; $70,000–$79,999; $80,000–$89,999; $90,000–$99,999; $100,000–$109,999; $110,000–$119,999; $120,000–$129,999; $130,000–$149,999; over $150,000 Excluded
State Separate dummy variables of: Brisbane; Queensland other than Brisbane; Sydney; NSW other than Sydney; Melbourne; Victoria other than Melbourne; Adelaide; South Australia other than Adelaide; Perth; Western Australia other than Perth; Hobart; Tasmania other than Hobart; Darwin; Northern Territory other than Darwin; Canberra; Australian Capital Territory other than Canberra Reduced categories
Education Separate dummy variables of: I prefer not to answer; Year 8 or below; Year 9 or equivalent; Year 10 or equivalent; Year 11 or equivalent; Year 12 or equivalent; Trade certificate or apprenticeship; Diploma, certificate etc; Bachelor or Honours degree; Post-graduate qualifications; Other Reduced categories
Demographic
Employment status Separate dummy variables of: Employed, working full-time (more than 35 hours a week); Employed, working part-time (less than 35 hours a week); Self-employed; Unemployed, looking for full-time work (more than 35 hours a week); Unemployed, looking for part-time work (less than 35 hours a week); Not employed, and not looking for work; Student; Beneficiary/welfare; Retired; Look after the house full-time Reduced categories
Occupation Separate dummy variables of: Managerial; Professional; Technician or trade worker; Community or personal services worker; Clerical or administrative worker; Sales worker; Machinery operators or drivers; Labourer; Other; Not working Excluded
Life stage Separate dummy variables of: Couple with no children; Couple with children living at home; Couple with grown-up children who have left home; Single person with no children; Single person with children at home; Single person with grown-up children who have left home; Other Reduced categories
Main financial institution Separate dummy variables of: ANZ; Bank of Queensland; Bank SA; Bankwest; Bendigo Bank; Citibank; Commonwealth Bank; CUA; Heritage Bank; HSBC; ING; Macquarie Bank; National Australia Bank; Police Credit Union; St. George; Suncorp; Teachers Credit Union; Westpac; Other bank; Other building society; Other credit union Excluded
Household size Number Excluded
Card-related
Premium card Boolean; 1 where primary card is a premium card (offers prestige services and/or contains premium branding) Included
Charge card Boolean; 1 where primary card is a charge card that must be repaid in full every month Included
Credit card rewards rebate Basis points Included
Credit card interest rate Percentage points Included
Revolver Boolean; 1 where respondent has stated that they always or sometimes revolve their credit card balance Included
Owns a credit card Boolean Included; only for debit card regression
Preference
Speed of transaction Boolean; considers speed of transaction in choosing payment method Included
Reward points Boolean; considers reward points in choosing payment method Excluded
Additional charges Boolean; considers additional charges in choosing payment method Included
Safety/security Boolean; considers safety/security in choosing payment method Included
Own funds Boolean; prefers to use own funds in choosing payment method Included
Use borrowed funds Boolean; prefers to use borrowed funds in choosing payment method Excluded
Obtain cash-out Boolean; considers whether cash-out is available in choosing payment method Excluded
Privacy/anonymity Boolean; considers privacy/anonymity in choosing payment method Included
Availability Boolean; uses whatever is available in choosing payment method Excluded
Ease of managing finance Boolean; considers ease of managing finance in choosing payment method Excluded
Table E2: Predicted Mix of Payments Using Stated Range of Willingness to Pay
$50 point-of-sale transactions; per cent of payments
Stated range of willingness to pay(a) Consumer Use Survey data(b) Predicted willingness to pay
Cash 50 51 51
Debit card 19 29 18
Debit card/credit card(c) 15 na na
Credit card 16 20 31

Notes: (a) Assumes respondents not willing to pay a 0.1 per cent surcharge will use cash
(b) Reserve Bank of Australia's 2013 Survey of Consumers' Use of Payment Methods
(c) Respondents' whose willingness-to-pay ranges for debit cards and credit cards are identical

Sources: Authors' calculations based on survey data; RBA
Table E3: Prediction Crosscheck with Stated Willingness-to-pay Range
Per cent of respondents
Debit card Credit card
Predicted willingness to pay is:
In the stated range 53 41
Within 50 basis points of the stated range 68 61
Within 100 basis points of the stated range 76 75
Lower than stated range 33 34
Higher than stated range 14 25