The State of Payment Methods: More Choice and Economic Changes Are Affecting How Consumers Spend
Although debit still reigns supreme, with consumer preferences moving toward digital, cash and checks will continue to be displaced in the US. Consumer interest has been skewing toward digital alternatives, and cash is taking a major hit: Less than one-fifth of US adults cited cash as their preferred method for in-person spending in 2021, according to the Federal Reserve Banks. Younger consumers and fewer low-value purchases are driving the dissipation of cash.
Along with cash, checks are trending downward: In October 2021, just 46% of US adults stated that they had used a check in the past 30 days, according to the Federal Reserve. Generally, consumers use checks for infrequent, high-value transactions. However, with the increasing availability of online bill pay and mobile peer-to-peer payment apps, digitization and convenience are hastening the check decline. Additionally, business transactions made with checks plummeted to 33.
Cash and check usage may be dwindling, but debit and credit cards are seeing upticks among economic uncertainty. With that being said, an estimated 82% of US adults have access to a debit card, per Pulse, making growth difficult. For credit cards, the risk lies in the ability for consumers to make minimum payments paired with less frequent high-ticket purchases as concerns about inflation and job security persist.
Another winner of the pandemic has been buy now, pay later as it combines the flexibility of credit with short repayment terms, app-based shopping, and a simple user experience. So long as consumers are struggling to make ends meet, merchant acceptance rates continue to increase, and new entrants improve accessibility, BNPL will keep growing and threatening the use of credit cards.
As consumers become more concerned about the economy and job security while also steadily adopting new digital solutions, we are seeing shifts away from traditional payment methods. Curious to learn more about the state of payment methods?
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