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  5. Financial Technology Adoption: Network Externalities of Cashless Payments in Mexico

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Financial Technology Adoption: Network Externalities of Cashless Payments in Mexico

  • Sean Higgins
American Economic Review (Forthcoming)

Abstract

Do coordination failures constrain financial technology adoption? Exploiting the Mexican government’s rollout of one million debit cards to poor households from 2009–2012, I examine responses on both sides of the market, and find important spillovers and distributional impacts. On the supply side, small retail firms adopted point-of-sale terminals to accept card payments. On the demand side, this led to a 21% increase in other consumers’ card adoption. The supply-side technology adoption response had positive effects on both richer consumers and small retail firms: richer consumers shifted 13% of their supermarket consumption to small retailers, whose sales and profits increased.

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