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October 10, 2019
Cash in the 21st CenturyTalk About Payments WebinarFederal Reserve Bank of Atlanta
The views expressed in this presentation are those of the speakers and do not necessarily represent the views of any Federal Reserve Bank or of the Federal Reserve System.
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CASH IN THE 21ST CENTURYData from Federal Reserve surveysClaire GreeneShaun O’BrienOz ShyClaire.Greene@atl.frb.org, Shaun.Obrien@sf.frb.org, Oz.Shy@atl.frb.org
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Today’s presenters
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Shaun O’BrienSenior Policy ConsultantFRB San Francisco
Oz ShySenior Policy Advisor & EconomistFRB Atlanta
Claire GreenePayments Risk ExpertFRB Atlanta
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A brief history of cash
• Earliest coins: Lydia (Western Turkey), 7th
century BCE• First paper bills: China, ~800 CE• Europe catches up: Paper money printed in
Sweden, 1661
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Demand for cash continues rise
As of April 2019, U.S. currency in circulation
reached1.68 trillion worldwide
5.4% increase over 20180
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10
15
20
25
30
35
40
45
50
Bill
ions
of N
otes
Number of Notes in Circulation by Denomination
$50 - $100
$10 - $20
$1 - $5
Source: Cash Product Office.
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Consumer’s share of payments made in cash dropped 5 percentage points, 2016–2018
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0%
5%
10%
15%
20%
25%
30%
35%
Cash Debit Credit Electronic Check PrePaid Other
Shares of Payment Instrument Usage, volume, 2016–2018(2018 shaded darkest)
Change in shares is combined effect of decrease in cash payments and increase in card payments (mostly credit)
Source: Diary of Consumer Payment Choice.
Cash share for small-dollar payments dropped 2017-18
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55% 49%32% 33%
36% 40%60% 57%
2017 2018 2017 2018
$0.01-$9.99 $10-$24.99
Volume shares by dollar value
Cash Credit & Debit OtherSource: 2018 Diary of Consumer Payment Choice.
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Cash prefer-ers use cash more than others
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54%
20% 20%
16%
52%
6%
11% 6%
50%
Cash Preferred Debit Preferred Credit Preferred
Payment use (volume shares) by stated preference
Cash Debit Credit OtherSource: 2018 Diary of Consumer Payment Choice.
Preferences shifting away from cash
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26% 22% 22%
41%42% 41%
27% 30% 30%
2016 2017 2018
Shares of consumers preferring each payment instrument
Cash Debit Credit OtherSource: 2018 Diary of Consumer Payment Choice.
Cash switchers lean toward debit
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100%
60% 55%
21% 25%
2016 2017 2018
Of consumers preferring cash in 2016, shares preferring cash in later years
Cash Debit Credit OtherSource: 2018 Diary of Consumer Payment Choice.
Unbanked make most payments with cash; underbanked are similar to banked consumers
Bank account linked56.7%
Bank account linked50.2%
Cash 61.9%
Cash 26.7%Cash 20.1%
Money order 4.7%
Prepaid card 17.2%
Unbanked Underbanked Fully banked
Volume shares of payments, by banking status
Bank account linked Cash Money order Credit card Prepaid card Income deduction
Source: 2018 Diary of Consumer Payment Choice.
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Lower income correlates to cash use, higher incometo credit card use
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38%30% 27% 24% 19% 20%
15%15% 16% 22% 29%
37%
<$25k $25-<$50k $50k-<$75k $75k-<$100k $100k-<$125k $125k+
Volume shares of payments made by income, October 2018
Cash Credit OtherSource: 2018 Diary of Consumer Payment Choice.
Millennials used cash relatively less often than others: ages 24–38 in 2018
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34%18% 19%
27% 31% 33%
Under 25 25 to 34 35 to 44 45 to 54 55 to 64 65 and Older
Volume shares of payments made using cash, by age, October 2018
Cash Other payment instrumentSource: 2018 Diary of Consumer Payment Choice.
Urban households used credit cards more, # of cash transactions similar
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29% 26% 24%
16% 23% 27%
Rural Mixed Urban
Volume shares of payments made by community type, October 2018
Cash Credit OtherSource: 2018 Diary of Consumer Payment Choice.
We mostly get cash from family & friends
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35%
21%
13%
13%
9%
9%
Family or friend
ATM
Employer
Cash back at a retail store
Bank teller
Other
Volume shares of instances of getting cash, 2017
Source: “How Consumers Get Cash: Evidence from a Diary Survey.”
By value, we get 40% of cash on Fridays• On average, consumers get $200 on Fridays
• We get the least cash by value on Sunday
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Source: “How Consumers Get Cash: Evidence from a Diary Survey.”
Mostly, we get cash in multiples of $20
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Source: “How Consumers Get Cash: Evidence from a Diary Survey.”
Cash used for 3/4 of P2P payments;New methods take share from checks
72 74 75
18 14 10
2015 2016 2017
Shares of P2P payments by number
Cash Paper check Cards PayPal Account-to-account transfer OtherSource: Diary of Consumer Payment Choice.
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For in-person payments, Cash is used most
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40%
39%
35%
30%
29%
30%
20%
23%
25%
9%
9%
9%
2016
2017
2018
Shares of in-person payments by number
Cash Debit Credit OtherSource: Diary of Consumer Payment Choice.
Cash used for 1/3 of nonprofits, food, gas
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5%
16%
17%
24%
34%
34%
36%
18%
49%
76%
52%
65%
66%
18%
77%
35%
6%
24%
45%
Housing related
Entertainment and transportation
General merchandise
Medical, education, personal services
Food and personal care supplies
Auto and vehicle related
Government and nonprofit
Payment instrument use by payee type (volume shares), 2018
Cash Card OtherSource: 2018 Diary of Consumer Payment Choice.
Cash used for almost half of small-dollar purchases
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Source: 2018 Diary of Consumer Payment Choice.
49%33%
16% 10% 6%$0.01 - $9.99 $10 - $24.99 $25 - $49.99 $50 - $99.99 $100 +
Volume shares of payments by purchase amount, 2018
Cash Other
What influences the choice to use cash?
<$10
>$10HHI>$110k
HHI<$110k
<$20=$20
<$20Age >$54
Age <54
>$20Age <65
Age >65HHI>$48k
HHI<$48k
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Source: “How Currency Denomination and the ATM Affect the Way We Pay.”
Consumer likely to choose cashConsumer likely to choose creditConsumer likely to choose debit
Behavior differs at the point of sale
When paying in person… choices differ with card ownership
Neither non-prepaid debit nor credit
9/10 purchases in cash
Both non-prepaid debit and credit
1/3 purchases in cash
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Grocery, convenienc
e, pharmacies
27%
Fast-food restaurants,
coffee shops, etc.
22%
General merchandis
e20%
Gas stations
17%
Sit-down restaurants
& bars10%
General services
4%
At left, share of cash payments (volume) by merchant typeSource: “Cashless Stores and Cash Users.”
Cash for paying
Access
“I don't think we will ever be entirely cashless, maybe in large part because I don't know if we will ever be in a world that every person has a smartphone or a mobile device.”
Legislative action
1978 • Massachusetts2019• Philadelphia• New Jersey• San FranciscoProposed• Cash Buyer Discrimination Act
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PayPal CEO, WSJ, 2/20/2018
Cash for emergencies
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Or glitches (September 2019, Harvard Square)
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Or merchant preference (July 2019, Boston)
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• Survey of Consumer Payment Choice, SCPC (2008-2019)• Adoption of deposit accounts and payment instruments• Use (# per month) of payment instruments by 7 payment types• Respondents rate payment instruments on characteristics
• Diary of Consumer Payment Choice, DCPC (2012, 2015-2019)• Use (# and $) of payment instruments for all payment types• Types of payees and consumer expenditures
Surveys of U.S. consumers, 18+
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References and survey dataReferences“2019 Findings from the Diary of Consumer Payment Choice” by Raynil Kumar and Shaun O’Brien, Federal Reserve Bank of San Francisco Fednotes, June 2019.“Cash Me If You Can: The impacts of cashless businesses on retailers, consumers, and cash use” by Claire Wang, Federal Reserve Bank of San Francisco, August 2019.“Cashless Stores and Cash Users” by Oz Shy. Federal Reserve Bank of Atlanta Working Paper 2019-11, May 2019.“Changes in U.S. Consumer Payments” by Shaun O’Brien. Federal Reserve Bank of San Francisco, forthcoming.“How Consumers Get Cash: Evidence from a Diary Survey” by Claire Greene and Oz Shy, Federal Reserve Bank of Atlanta Research Data report 19-01.“How the ATM Affects the Way We Pay,” by Oz Shy Federal Reserve Bank of Atlanta Working Paper 2019-02, February 2019.“Payment Instrument Adoption and Use in the United States, 2009-2013,” by Consumers' Demographic Characteristics” by Sean Connolly and Joanna Stavins Federal Reserve Bank of Boston Research Data Report 15-6.
Kurz, Christopher, Geng Li, and Daniel J. Vine (2018). “Are Millennials Different?,” Finance and Economics Discussion Series 2018-080. Washington: Board of Governors of the Federal Reserve System, https://doi.org/10.17016/FEDS.2018.080.Judson, Ruth (2012). "Crisis and Calm: Demand for U.S. Currency at Home and Abroad from the Fall of the Berlin Wall to 2011," International Finance Discussion Papers 1058. Board of Governors of the Federal Reserve System (U.S.).
Fed consumer surveys• Survey of Consumer Payment Choice• Diary of Consumer Payment Choice• Survey of Consumer Finances• Survey of Household Economics and Decisionmaking• Survey of Consumer Expectations• Consumers & Mobile Financial Services• Federal Reserve Payments Study
Follow the blog• Take on Payments, every Monday
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