Paper Cash Me if you Can: ATM Explosions, Payment Choice, and Consumption

We study the consumption effects of a shift from cash to card payments exploiting 275 explosive attacks on ATMs, which provide plausibly exogenous variation in the local availability of cash. Using home scan data, we find households increase their consumption by 2.3% after an ATM in their vicinity is attacked. Purchases of more expensive, branded products, and temptation goods drive the increase in spending, and the effect largely dissipates after 3 months. Payment diaries from survey data suggest a permanent increase in card payments following explosive attacks. The results are consistent with short-term overspending as consumers transition to digital payments.

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