Report: Consumers "Almost Never" Change Payment Types

The Federal Reserve Bank of Boston released a working paper on June 20 that shed new light on essential consumer behaviors that have long remained mysteries in the payments industry. Namely, how loyal are consumers to their favorite payment instruments, and how often do they switch between payment types? 

Entitled "Payment Choice with Consumer Panel Data," the study compiled three years of grocery store purchase data gleaned from 13,000 households and 1.6 million transactions. The result is a 26-page paper that revealed intruiging insights into how consumers use cash, checks and cards - and how things might change with mobile.

Boston University Professor of Economics Marc Rysman opened up about the findings, discussing the factors that led him to his research and his opinions about the discoveries in an exclusive interview with Market Platform Dynamics (MPD) CEO Karen Webster.

The result was a candid conversation that exposed just how entrenched consumers are when it comes to how they pay.

"I was surprised at how, once someone picks a favorite [payment type], they still don’t use it all the time," Rysman told "There still is this element of, when the transaction size is small, they're going back to cash."

Rysman and Webster talked about how the research could be applied to a host of topics, including mobile payments and mobile wallets, and revealed that mobile payments may have more trouble becoming the future of payments than some would assume.

What Was Most Surprising About The Data?

Rysman told Webster that he was shocked at how little consumers switched between cash, cards and checks. The study was not able to distinguish between debit and credit transactions, but Rysman indicated that he's open to following up the research given the right data sets.

The BU professor said that consumers "almost never" deviate from their favorite payment types, but that they also aren't likely to use their top payment method all the time.

How Hard Is It To Convince Consumers To Switch Payment Methods?

Webster posed this question to address the question of mobile payments, and whether the research suggested that new payment types were capable of making headway in the industry. Despite Rysman's finding that consumers are stuck in their habits when it comes to payment types, he was still optimistic about new alternative payments.

"Generally, the news is still sort of good from our paper..., you do see people still carrying multiple [payment] types, and using it at least a little bit, are willing to switch somewhat," Rysman said. "They’re kind of willing to switch around a little bit within [payment types], that at least gives you the kind of beachfront for mobile to get in there, and for people [to] try it out."

Rysman said that the story would be much different if the research found that consumers were liable to stick tightly to only their top payment method of choice.

Were Behaviors Influenced By The Recession?

Rysman said that he couldn't rule out the recession as an important factor in his research due to its short time window. His words indicated that the theory was possible, but his tone suggested that he believes this conjecture to be unlikely.

"It might have been a time where people just weren’t trying new stuff, and they were... cutting back in lots of ways," Rysman said. "And, and maybe, [they weren't getting] lots of new credit card offers that might have enticed them to switch from cash [to check]."

What Does This Mean For Mobile Wallets?

To this question, Rysman once again deferred to his main finding, that consumers are hardwired to pay like they already pay. Further, the author expressed concerns about how mobile wallets can become "invisible" to consumers when buried in apps.

"It’s the conclusion you would draw from our research, there’s no question," Rysman said.

For more on the findings and what they mean for the payments industry, read the full working paper here.



Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border.

Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.

Click to comment