For the past 20 years, the growth rate of electronic payments in the U.S. has been very impressive. Aside from a small decline during the financial crisis in 2009, we have witnessed a steady, and significant, increase in transactions made with more than a fivefold increase between 2000 and 2012. But with such a surge in the use of plastic it raises the question, are people still using cash?
According to a publication by the Federal Reserve Bank of San Francisco on consumer preferences and the use of cash, the 2012 Federal dataset reveals that the value of purchase, demographic and socioeconomic factors are all influencers when consumers choose a payment method.
For small value transactions the likelihood of cash payment is approximately 60 percent of all purchases less than $25. But, people who express a preference for cash tend to use it for the majority of purchases up to $75. Overall, the probability of cash payments decreases as the transaction value increases. This is consistent with the idea that consumers are uncomfortable carrying around large sums of cash for concerns of theft or loss due to its anonymous and untraceable nature.
Cash usage and spending patterns also tend to strongly correlate with age, education and household income. Age is often an influencer because it is generally related with income level, credit availability and level of involvement with financial institutions. For instance, younger consumers tend to make more cash payments because it is the most accessible payment option, and doesn’t require credit approval, which many young consumers have more difficulty obtaining due to lack of credit history. While there is still the exception of personal preference, education level tends to be negatively correlated with cash usage when compared with the usage of a payment card. Additionally for similar reasons to age, people with lower household incomes make more payments in cash than people with higher household incomes.
The common denominator between all these influencers is essentially the level of involvement that a person has with financial institutions. Whether or not a person has an active bank account can significantly dictate payment behavior, due to the availability of options. Without access to a credit or debit card, cash is the basic alternative. However, while the large and growing underbanked population in the U.S. is labeled the “cash preferred” consumer, it isn’t always by choice. This group of more than 106 million people are unbanked or underbanked for various reasons, but most as a result of their circumstances. Since they don’t have regular access to a bank account, debit card or credit card, they prefer to pay bills in cash because the associated fees are lower then the alternative of paying a check cashier fee, purchasing a money order and mailing payment to the biller in the hopes that it arrives before its due date.
While electronic payments in the U.S. will continue to increase, cash is still a very utilized method of payment for many, particularly the underbanked. Cash accepting bill pay kiosks and point-of-sale bill pay facilitates bill payment at convenient locations at a much more affordable cost.
Want to learn more about how cash accepting bill pay kiosks can be strategically placed in neighborhoods where your customers need to pay in cash? Click here!