While payments innovations may create buzz in the U.S. market, cash remains decidedly low-tech and top of the payments heap. According to PYMNTS research, cash usage in the U.S. has been on a stable course the past few years, hovering between 14 and 15 percent of GDP since 2003. Find more insights, along with an interview with Mike Kaplan, SVP at cash bill-pay service PayNearMe, inside the brand new PYMNTS.com Global Cash Index™ Americas Analysis.
Americans have more payment options than ever before, from the digital payment info stored in mobile wallets to credit and debit cards in their physical wallets.
But even with these new choices, Americans still cling to cash when making many purchases. According to research revealed inside the PYMNTS.com Global Cash Index™ Americas Analysis, while the onslaught of payment cards, digital wallets and contactless payments may have created a buzz in the U.S. market, they are still far from replacing cash. The U.S. relies more on cash than on any other form of payment, according to the analysis, with cash usage remaining relatively steady since 2003, ranging between 14.3 percent and 15.5 percent of the gross domestic product. In 2009, overall cash usage spiked around the global financial crisis but then went into decline, dipping to 13.1 percent in 2015.
And according to a report from the Federal Reserve Bank of San Francisco, “… cash remains a unique, resilient and heavily used consumer payment instrument.”
The report found that 32 percent of transactions used cash in 2015 and that demand for cash remains strong in the United States.
And cash’s popularity isn’t limited just to retail purchases. PayNearMe allows consumers to pay bills with cash by visiting local retail partners like Family Dollar or 7-Eleven. According to Mike Kaplan, senior vice president of merchant processing, the company’s customers elect to pay bills for things like cell phones and utilities, because they may not have bank accounts or just find that paying in cash is more convenient.
PYMNTS recently caught up with Kaplan to find out more about why consumers are consistently choosing cash, even with more options than ever before, and the future of the physical payment method. He said that despite these new payment methods, consumers are eager to pay for even larger transactions, like utility bills, with cash. Customers pay bills by downloading a smartphone app and adding billers, before visiting one of many retail locations, where they present a barcode for a biller to a cashier, along with the amount of cash they wish to use to pay.
“There’s a perception that consumers either can’t or won’t pay their bills in cash. But families earning less than $25,000 use cash for 48 percent of their transactions, and those who earn between $25,000 and $50,000 use it for 33 percent of transactions,” Kaplan said. “So that equates to roughly 45 percent of households who are using cash for at least a third of their transactions, and that’s a huge market, and the lack of services to pay bills with cash is a relatively big problem.”
Paid in cash, pay in cash
Kaplan told PYMNTS that most consumers who continue to choose cash when it comes time to pay do so because they feel more comfortable using physical currency over a credit or debit card or digital payment method. Despite the claims of simplicity offered by many modern payment methods, many cash-based consumers find it to be more convenient than digital or mobile wallets.
He noted that many of PayNearMe’s customers get paid in cash, meaning that is easier for them to then pay their bills using the same method. For those consumers and customers who are unbanked, cash bill payment services provide a way to use their payment method of choice for larger purchases.
“For a lot of these folks, this is how they get paid — they get paid in cash,” Kaplan explained. “Changing consumer behavior is hard. If you get paid in cash and that’s what you’re used to, that’s what you’re going to be most comfortable with. Any of these new payment methods need to prove that they are easier and faster than those consumers are currently used to, and right now that just isn’t there.”
In order to make their service as convenient as possible, Kaplan said that his team has partnered with familiar retailers with stores located close to the customers that most frequently use the service, including national retailers like CVS, Family Dollar and 7-Eleven.
Kaplan said that the company looks to partner with retailers like these because they combine to offer more than 28,000 locations around the U.S., meaning most customers have a local store that offers this service. He also noted that the company’s retail partners often have a history of embracing new types of payment methods.
“Our partners, and 7-Eleven in particular, have always been very forward-thinking and innovative when it comes to this sort of payment technology market,” Kaplan said. “They also have a fair number of these unbanked or underbanked consumers who already shop at their stores frequently, so we know that these types of consumers frequent those stores and feel comfortable there.”
Cash’s cold, hard future?
Along with the convenience that many of PayNearMe’s unbanked or paid-in-cash consumers enjoy, Kaplan noted that many of the company’s customers are older and are simply not used to using more modern payment methods like a credit or debit card, much less a mobile wallet or contactless payment.
But there are fewer consumers who are unfamiliar or uncomfortable with digital payment technology every day. The PYMNTS.com Global Cash Index™ Americas Analysis found that cash share has decreased steadily since 2009 and that trend is set to continue into the next decade.
But that doesn’t mean cash’s reign as king is on its death bed. While older consumers may not be used to these new payment methods, Kaplan noted that even those who have grown up with computers and smartphones still cling to cash. He said that, according to a study published in late 2016 by the Federal Reserve Bank of San Francisco, millennials use more cash than anyone else, paying for nearly 40 percent of their transactions with physical currency.
And it isn’t just Kaplan with a sunny view of cash. Brendan Burge, a currency processing and optimization specialist and owner and executive editor of CountingOnCurrency, told PYMNTS that cash remains popular with younger millennials because of their difficulty in getting traditional financial resources like a credit card or bank accounts.
“Millennials have a very difficult time getting things like credit cards, debit cards or bank accounts, unless they are backed up by a parent or a guardian. So I don’t see them moving away from cash anytime soon,” Burge said in an interview.
It seems that even as technology poses a threat to cash’s dominance, it’s also giving the many consumers who still turn to physical currency new ways to pay in cash.
To download the analysis, please click below…
About the Index
The PYMNTS.com Global Cash Index™, a Cardtronics collaboration, focuses on the use of cash for making payments and as a payment method that equally plays a role with cards, checks, direct debit and other methods of settling up between consumers and businesses. Unlike most reported estimates of cash, our proprietary data analysis focuses on the use of cash for making payments rather than hoarding.