In 2018, for the first time, cash fell from its position as the most frequently used type of payment in the U.S. Cash use was down 4 percent from 2017, totaling 26 percent of transactions in 2018. Debit cards claimed the top spot, up 5 points to 28 percent.
There are several factors that are contributing to a smaller percentage of non-cash payments. Online shopping and ordering are increasing, which require digital payments. And, in general, there are more payment options to choose from. For example, more consumers are using mobile wallets for in-person payments. But are these signs that the U.S. is becoming a cashless society?
Consumers Still Use Cash
Even though cash is no longer the most commonly used form of payment in the U.S., it is still widely used. While the percentage of transactions using cash has decreased, the Federal Reserve’s 2019 Findings from the Diary of Consumer Payment Choice states that the demand for cash has grown. In 2015, the value of currency in circulation as $1.38 trillion; in 2018, it was more than $1.67 trillion.
The Fed also points out that cash is still the most popular form of payment in rural areas and among consumers under 25 and over 55 years of age. In addition, consumers use cash for 49 percent of purchases less than $10 and 42 percent of purchases less than $25.
“What the report tells us is that while usage of other forms of payment continues to grow, demand for cash remains strong, particularly for small value, in-person transactions,” says Mark Gould, Chief Operating Officer of the Federal Reserve Bank of San Francisco and Cash Product Director of the Federal Reserve System’s Cash Product Office.
Roger Replogle, Executive VP and Cash Product Manager at the Federal Reserve System’s Cash Product Office, adds that people heavily rely on cash during emergencies and 75 percent of U.S. consumers carry an average of $60 in cash on a daily basis.
What VARs and ISVs Need to Know
If the U.S. ever becomes a cashless society, it won’t happen in the near future. Consumers’ payment habits are changing slowly, and cash remains one of the top three most commonly used forms of payment. Instead of attempting to determine what will replace cash or any other form of payment as you develop or build solutions for your clients, a better perspective would be to consider which new payment methods will be added to the expanding payments ecosystem.
It’s crucial that you provide point of sale (POS) systems with integrated payments that enable your clients to accept all forms of payment their customers want to use, such as EMV chip cards, mobile and contactless payments, electronic benefits transfer (EBT), flexible spending or health savings accounts (FSA/HSA), gift cards, and loyalty rewards redemption. In addition, it’s still essential that you provide your clients with solutions that help them securely manage cash, as it remains a prevalent method of payment.
ISVs and VARs also need to monitor trends and advise your clients of changes in consumer payment preferences, for example, the recent increase in unattended payment transactions and trending mobile wallet and contactless payment use. Help your clients position their businesses to provide optimal consumer experiences, whatever the future brings.