Federal Reserve Survey Reflects Changing Cash Usage

In October 2020 the Federal Reserve’s national Cash Product Office (CPO), with the Federal Reserve Bank of Atlanta and Federal Reserve Bank of Boston, conducted the annual Diary of Consumer Payment Choice survey.

A supplemental survey in April revealed that cash held as a store of value increased on average by more than $200 from October 2019 levels to nearly $485 per consumer in April 2020. Only one third of consumers reported making any in-person payments, compared to 96% in October 2019.

The key October survey findings were: 

• Cash holdings increased, with an average household holding about $530 in cash in August as a store of value, while cash held in their pockets, purses or wallets remained stable at around $70.

• Respondents who made an in-person payment in the 30 days prior to completing the survey increased to 60%, up from 34% in April.

• More than 40% of respondents switched to making payments online or over the phone rather than in-person.

• Most respondents using cash received change despite the coin circulation issue, but only 4% reported depositing coin at a financial institution or kiosk.

Debit card fraud significant

On a related topic, Mercator Advisory Group US has published a paper on debit card usage in 2020 (‘2020 North American Payments Insights: Debit – Continued Change’). Based on a consumer survey, it shows that 25% of consumers reported incidents of debit card fraud, up from a low point in 2018 of 17% but similar to 2019.

Fraudulent charges were experienced by 13% of consumers and 12% of cards were reported lost or stolen. 11% of consumers were notified by their card issuer of actual or possible debit card fraud.

Nearly a half of those surveyed received reward points for using their cards and they said this motivated them to spend more using these cards.

There has been an increase in the use of person-to-person (P2P) payment apps, rising from 57% in 2017 to 70% in 2020. PayPal dominated but Venmo, Zelle, Google Pay and Square Cash have all roughly doubled their reported usage since 2017. In 2020 the average frequency of P2P services has gone down to 8 transactions annually from 9 in 2019, presumably due to less social interaction during the pandemic.