The Federal Reserve Bank of San Francisco just released preliminary findings from its 2015 Diary of Consumer Payment Choice, a study on cash that was originally conducted in 2012. This year’s study found that while the use of cash has declined slightly since 2012, it is still the most popular payment method among people of all ages, across all types of transactions. Of course, that means you’ll continue to accept, handle and manage it, which can be costly.
Between 2012 and 2015, the use of cash shrank from 40 percent to 32 percent of transactions, while debit and credit card use increased (2 and 4 percent, respectively) to make up most of the difference. Additional findings show:
Cash is the most frequently used retail payment method: In 2015, cash was used in approximately one-third (32 percent) of all transactions, followed by debit cards at 27 percent and credit cards at 21 percent. Electronic payment methods and checks made up the smallest shares of transaction volume, but the value of these types of payments were higher on average than cash, debit, or credit payment values.
Cash is widely used, even when other options are available: In six of nine merchant categories, people used cash more often than any other payment. The categories of food and personal care supplies, auto- and vehicle-related, general merchandise, and gifts and transfers to people made up almost 90 percent of cash transactions.
Cash dominates small-value payments: Small-value payments make up the majority of in-store transactions, and cash is used for 50 percent of payments under $25, and more than 60 percent of payments under $10. Interestingly, the study found consumers are using cash for these small transactions out of convenience, not due to merchant-specific pressures like stores not accepting card payments under a certain amount.
The average value of consumer cash holdings increased slightly: Nearly 83 percent of study participants held cash at the end of at least one day during the designated three-day reporting period, and 69 percent held cash at the end of all three days. The average amount of this held cash increased slightly, from $55 to $59, between 2012 and 2015.
Younger shoppers prefer cash: Respondents age 18-24 showed the most favor toward cash — 38 percent noted cash as their primary payment preference. In other age groups, at least one-quarter of respondents said cash was their preferred way to pay. Every age group reported more cash transactions than credit transactions, and more than half of all participants said cash was their backup choice when their preferred method wasn’t available.
Cash preference is stronger among lower-income households: Households with an annual income under $50,000 leaned toward cash the most and used it most frequently when making payments. In households with an income under $25,000, 48 percent said they preferred cash.
With this confirmation that cash remains the most popular payment method for in-store transactions, what do retailers need to consider? Remember that while cash transactions may seem simple, there are still costs associated with accepting and managing it.
A combination of hard-dollar costs, time and labor costs and inefficient reporting add up to a cost of accepting cash that, in some retail verticals, is even higher than the cost of accepting credit. With automation solutions that help you manage cash more efficiently and immediately understand your cash position by location, you can significantly lower the cost of accepting cash, while helping your operations run more smoothly and increasing customer satisfaction at the same time.