What’s in your wallet? Perhaps a debit card, some discount cards, your healthcare card and a few old receipts? Ok, now look to see how much cash is in your wallet. Right now, I have $22 in cash along with an assortment of cards, old receipts and gift cards that I always forget to use. It would be fair to describe me as someone who does not like to use cash—hardly surprising for a trainer at an organization dedicated to electronic payments, right? Yet, while I am not a big fan of cash as a payment method, many others prefer cash and likely hold much more in their wallets on a regular basis. The fact is that despite the proliferation of electronic payment methods in the past few decades, cash remains the king of payments in America. But our relationship with cash is changing and a recent study by the Cash Product Office of the Federal Reserve Bank in San Francisco provides valuable insight into current cash usage.
The study, Cash Holdings: A New View on Cash utilized data gathered in the 2015 Diary of Consumer Payment Choice, which is a regular survey conducted by the Cash Product Office to understand consumer behavior. The researcher, Claire Wang, found 69% of participants carried cash every day of the survey and the average amount held was $59 (the median was $21 so I guess my wallet isn’t so unusual). Only 17% actually carry cash all the time and use it as their preferred payment method, which means that many Americans carry cash but only as a back-up to other methods. Wang describes these consumers as “just-in-case” users of cash—people who carry, on average $64, but would much rather use debit or credit cards. Another group identified in the study is the “cash-averse”, or consumers who did not carry cash and used debit cards instead. While consumers characterized as “just-in-case” spanned across all age groups, the “cashaverse” are a young group—over half are in the millennial generation and the average age is 38. Most of these young consumers choose debit cards to make payments, and though the study does not conclusively establish the cause(s) for this preference, Wang offers some possible reasons, such as millennials’ reluctance to use credit cards.
Although you may not talk much about cold, hard cash in your financial institution’s electronic payments operations department, this study is important to the industry because we have a stake in understanding how and why consumers continue to use cash instead of ACH, debit cards or any other electronic payment methods. Now that millennials are the single largest living generation in the country, their relationship with cash and all other methods will be critical for institutions to analyze in order to remain competitive. As we take steps to move to a future of faster payments and even more methods wrestling for a share of a consumer’s wallet, knowledge will be the key to developing products and services that keep up with the ever-changing attitudes and behaviors of customers and members.
All EPCOR members now have access to the new Emerging Payments Portal at epcor.org/emergingpayments, where we highlight the latest trends in payments to help you understand what is happening and how and why your institution will be affected.
You can access the full study though the Emerging Payments Portal page, found under the ‘Resources’ section. The Federal Reserve Bank’s Cash Product Office also has many other interesting studies and facts on the cash flowing through our economy if you wish to learn more.