Payment Instrument Choice: The Case of Prepaid Cards

Technological advances continue to allow more and more individuals and businesses to shift toward the electronic delivery of information instead of the exchange of paper-based documents. Examples of this migration include the use of email instead of traditional mail service, the delivery of real-time news via the Internet instead of a physical newspaper and the payment of bills using online transfers instead of mailing checks. While electronic delivery is faster, often less costly and often more reliable and secure, the older paper-based systems have not disappeared. Some users of the older technology prefer it to the newer technology, given the incentives they face today. In this article, we will explore the replacement of paper-based payment instruments by prepaid payment cards—an electronic alternative.