The Impact of Government Intervention in Cashless Retail Market: Evidence from the Natural Experiment

This study examines whether government intervention in the retail payment market a↵ects the stimulation of cashless transactions. The establishment of the National Pay- ment System is chosen as a studied form of intervention. The primary assumption in the study is the exogenous nature of the establishment of the domestic payment scheme. This assumption allows forming a causal link between the NPS and changes in the mar- ket. The level and growth rate of transactions were analyzed for credit and debit market separately. The changes in these metrics help to identify whether the establishment of NPS stimulates the retail payment market. The results show that NPS mainly a↵ects the debit market, not causing any changes in the credit market at all. The robust check shows that the interchange fee is an ine↵ective method to stimulate the retail cashless payment market. The results of this paper have important practical implications for the central banks, as they help to adjust regulatory strategies by focusing more on non-tari↵ stimulation methods.