Survey of Consumer Payment Choice sheds light on payment preferences amid holiday shopping season
3Qs with the Consumer Payment Research Center's Claire Greene
The National Retail Federation estimates 137.4 million Americans will shop over the 2016 Thanksgiving weekend (Thursday through Sunday) and 36 percent of consumers plan to shop online for Cyber Monday. With holiday shopping to-dos top of mind, we sat down with the Boston Fed’s Consumer Payments Research Center (CPRC) Payments Analyst Claire Greene to learn more about consumer payment preferences and the latest release of the Survey of Consumer Payment Choice.
1. The 2014 Survey of Consumer Payment Choice is now the seventh such survey conducted by the Boston Fed and is designed to model consumer behavior, see how behavior changes over time, and to understand consumer preferences. What has CPRC noticed over the course of the survey’s lifetime? Have there been any notable changes over time?
We released our 2014 Survey of Consumer Payments Choice earlier this year, and respondents completed the ninth survey in September and October. Our latest survey revealed debit cards and cash continue to account for the two largest shares of consumer payments in 2014 (approximately 31 and 26 percent, respectively), and the credit card share reached about 23 percent. In terms of the number of payments, consumers made an average of about 66 payments in a typical month in 2014—of those, nearly 33 percent were bills and about 67 percent were for non-bills.
Since the survey started in 2008, you can see a trend away from checks and toward electronic ways to pay. If you look at the trend of payments made from a checking account, you can see debit cards, online banking bill pay, and bank account number payments (when you supply your bank routing number and account number at a third-party website) replacing checks.
2. With such an array of payment methods available, how do consumers choose which options best suit them?
There is an incredible array of payment options available today. The average consumer has about five ways to pay. In part, payment choice is correlated with consumers’ individual evaluations of safety, convenience, and cost—and your evaluation could be completely opposite of mine. You may think credit cards are low cost because you pay off the entire balance every month and get rewards like cash back. Another person may think they are expensive because he or she is revolving credit card debt and paying interest and, perhaps, late fees. You may think cash is safe because you are most worried about identity theft and privacy, or you are extra careful with it. I may think cash is unsafe because I am prone to losing it or having it stolen.
Payment behavior is correlated with income and demographics. Age, education, and income are especially strongly correlated with both adoption and use of most payment instruments. For example, consumers with the lowest income use cash more than other consumers and consumers with higher incomes tend to favor credit cards. Overall, consumer payment behavior changes slowly. Between 2013 and 2014, for example, there was no significant change in cash use. You can see a trend toward electronic payment methods since our first Survey of Consumer Payment Choice in 2008.
3. With now the tenth 2017 survey in the works, what’s top of mind for the Consumer Payments Research Center in the coming year?
Every year, CPRC works to adjust our surveys to better reflect the changing consumer payments landscape. For instance, in 2016 we refined questions that ask about U.S. consumers use of alternative financial services, including payday loans, going to a check cashing store, or selling an item at a pawn shop. We also have been working to understand what consumers know about virtual currencies, like bitcoin, and whether they’ve used a virtual currency.
People all across the U.S. completed the 2016 Diary of Consumer Payment Choice in October. In survey methodology, the term “diary” refers to a specific type of survey instrument that asks respondents to record information when events occur (for example, when a payment is made) or at specific times (for example, at the end of an assigned reporting day). This recording method makes it possible to collect dollar values of payments, which prior research has found to be important for payment instrument choice. So we’re very excited about this data.