The merchant’s hand in the consumer’s choice of payment instruments: an agent-based model

Philip Bergmann, Anne Weber and Niklas Ego

Abstract

This study presents an agent-based model to simulate the German retail payment economy, exploring the dynamic interactions between consumers and merchants in the adoption and usage of various payment instruments. By integrating detailed sociodemographic data and real-world payment behavior from the Deutsche Bundesbank’s payment behavior study, this simulation model accurately replicates current payment patterns and enables the examination of policy-driven scenarios. Through simulations of varying merchant acceptance rates, including reduced cash acceptance and enhanced card payment acceptance, the study analyzes the resultant shifts in consumer payment preferences and overall market dynamics. The results indicate that even minor changes in merchant behavior can lead to significant shifts in payment instrument utilization. This knowledge offers valuable insights for policy makers on the potential impacts of acceptance policies on financial inclusion and accelerating the adoption of digital payments while safeguarding accessibility to traditional payment methods such as cash.