Has COVID Changed Consumer Payment Behavior? 
COVID-19–related disruptions in economic activity affected not only how much people spent but also how they made payments. This paper examines in detail changes in consumer payment behavior by payment instrument and by payment channel. Using data from the Survey of Consumer Payment Choice, it compares consumers’ payment behavior before the start of the pandemic in March 2020 with their behavior several months after its onset.
Key Findings
- Compared with their behavior in 2019, consumers had shifted some of their purchases from in person to online by fall 2020, significantly lowered their use of cash for purchases, and shifted their person-to-person (P2P) payments away from cash and checks.
- The changes from 2019 to 2020 were statistically significant, in contrast to the changes in payment behavior from 2018 to 2019, which were not statistically significant.
- Despite the decline in the fraction of purchases that were in person, the fraction of consumers who made in-person purchases during the pandemic did not drop significantly, indicating that those making these purchases did so less frequently.
- The decline in the use of cash was the most notable change involving the payment instruments used for purchases. Since cash payments account for a sizeable share of in-person purchases, the decline in in-person purchases contributed to the decline in cash use.
- The use of cards for purchases—particularly credit cards—rose as consumers substituted away from cash.
- Adoption of P2P payments increased significantly from 2019 to 2020. However, the share of P2P payments made using cash or checks, held steady. The increase in the adoption of P2P payments was facilitated by an increase in the adoption of electronic P2P, especially the use of payment apps such as PayPal, Venmo, and Zelle.
- There was no change from 2019 to 2020 in the way consumers paid their bills.
Implications
The paper’s findings suggest that some longer-term changes in consumer payments accelerated or became more apparent during the pandemic. Given that many consumers shifted to remote transactions either by choice or because local restrictions forced them to do so, cash use may rise again when in-person services and other cash-intensive businesses return to more normal levels. However, it is likely that the pandemic accelerated the adoption of payment-related technologies including apps for electronic P2P.
Abstract
The COVID-19 pandemic has caused large changes in consumer spending, including how people make their payments. We use data from a nationally representative survey of U.S. consumers collected before COVID in 2018 and 2019 and during COVID in 2020 to analyze changes in consumer payment behavior during the pandemic. We find that compared with their payment behavior in 2019, consumers had shifted some of their purchases from in person to online by fall 2020, significantly lowered their use of cash for purchases, and shifted their person-to-person (P2P) payments away from paper (cash and checks). Those changes are consistent with what we might expect, as many people were less able or willing to shop in person. The adoption of electronic P2P increased, especially the use of payment apps such as PayPal, Venmo, and Zelle. Consumers who worked exclusively from home during COVID made significantly higher shares of their payments online or through mobile devices and were less likely to use cash at all compared with those who worked at least partly in person, even after we control for income and education levels. In contrast, payment-behavior changes that took place from 2018 to 2019 were smaller in magnitude and largely insignificant, suggesting that COVID likely accelerated any longer-term trends. Although it is too soon to determine whether these changes will persist for the longer term, we observed them several months after the onset of the pandemic, so they certainly were not just temporary shifts.