Payment Methods

Fed Study: Electronic Devices Used In 24 Pct. Of Consumer Payments

Devices Used In 24 Pct. Of Consumer Payments

Cards over cash – specifically, debit cards over cash.

Among the findings of the recent 2018 Diary of Consumer Payment Choice, produced through several of the U.S. Federal Reserve Banks, electronic payments are on the rise.

And debit card transactions, the report notes, have become the most widely used payment method, ahead of cash, at least as measured by value.

Credit held sway over both cash and debit.

The data was compiled through a survey of more than 2,870 individuals and the transactions they made during the month.

In terms of high-level findings, the U.S. consumers surveyed made more than half their payments with cards, at 54 percent of payments or 24 transactions. The overall volume of transactions was up 5 percent year on year to 43 payments, dominated by purchases at about 34 of those transactions with bill payments making up the remainder. The transaction tally per day came to about 1.4. The Fed banks said that 14 percent of respondents reported making zero payments.

Of the average 43 payments per month reported by U.S. consumers, and per the study’s findings, 14 were for everyday purchases like pharmacy, grocery and online shopping; nine were for food away from home with the inclusion of fast food, restaurants and bars; and four were related to financial services firms with the inclusion of IRA, insurance, mutual funds, credit card payments, mortgage payments and other loan payments.

“U.S. consumers made, on average, $3,999 worth of payments for the month,” which was up by $580 from last year, according to the findings.

The study estimated that the average value per consumer payment came in at $92. The growth in value of payments, generally speaking, has been on an uptrend since 2015.

The report showed that paper instruments – cash, check and money orders – were used in 32 percent of payments, or about 14 payments for the month. Drilling down a bit, according to the numbers, the dollar value of payments for electronic instruments, at 36 percent of the total, came in at $1,431, payment cards came in at $1,245 and the value stood at $929 for paper instruments.

“In October 2018, consumers made more payments with debit cards than with any other payment instrument (28 percent of payments),” the survey report said. “Cash, in all prior diary years the most-used payment instrument, followed with 26 percent of payments. Together with credit cards (23 percent), these instruments accounted for slightly more than three-quarters of the number of payments.”

Looking at the trend from 2017 to 2018, the study noted, “the decline in the use of paper instruments is primarily in cash, a statistically significant decline from 12 payments per month to 11.

The latest readings show a marked change from the previous years’ studies. Credit held sway over debit, at 27.5 percent of the number of transactions, but 31.2 percent of dollar amount. The numbers showed that debit card purchases for the month stood at 31.2 percent of transactions and 27.6 percent of the dollar amount. Cash represented 31.6 percent of transactions by number, but only 12.5 percent by total value.

In 2018, reported the study, 24 percent of all payments were made using electronic devices, while of those, one-third were made using a mobile phone.

As for cash holdings, U.S. consumers held on average $58 of cash on their person each day, statistically unchanged from cash holdings in 2016 and 2017.

The Fed findings echo data spotlighted by, and dovetailing with, findings in the How We Will Pay study done in collaboration between Visa and PYMNTS, where, at the end of last year, the propensity to use credit and debit cards on connected devices is particularly high among Baby Boomers and bridge millennials, with 72 percent and 53 percent using these channels, respectively. Elsewhere, that same study found that half of consumers carry between $10 and $15 in their wallets, but that cash is largely reserved for tipping.

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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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