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Federal Reserve Financial Services


Industry Perspective

Marking the second anniversary of Strategies for Improving the U.S. Payment System

February 2017

January 26, 2017, marks the two-year anniversary of the release of Strategies for Improving the U.S. Payment System (Off-site Link) paper. The paper outlines the multi-faceted plan for collaborating with payment system stakeholders to enhance the speed, safety and efficiency of the U.S. payment system. To commemorate another year of substantive industry progress and momentum across the payments industry, the Federal Reserve released a Strategies for Improving the U.S. Payment System – January 2017 Progress Report (Off-site Link), which highlights accomplishments as well as plans for 2017 related to five strategies:

  1. Stakeholder engagement
  2. Faster payments
  3. Payment security
  4. Payment efficiency
  5. Enhanced Federal Reserve Bank services


Continued collaboration drives meaningful change

2016 proved to be another year of successful collaboration between the private and public sector to achieve payment system improvement. These efforts resulted in substantial progress on each of the identified strategies for improving the U.S. payment system. High engagement throughout two stakeholder task forces further propelled progress and was evidence of the industry’s commitment to collaboration.

“The Fed’s priority is to advance improvements that are in the public interest so that consumers and businesses alike have access to efficient, real-time and highly secure payments in the United States,” said Esther George, president and chief executive officer of the Federal Reserve Bank of Kansas City, who is leading the payment system improvement initiatives on behalf of the Federal Reserve. “Through a number of collaborative efforts, the industry is making real progress on all fronts and we’re expecting to achieve a number of significant milestones in 2017.”


Faster Payments

The Faster Payments Task Force (Off-site Link) was established in May 2015 to identify effective approaches for implementing safe, ubiquitous, faster payment capabilities. During 2016, the task force continued its momentum and made substantial progress, with key accomplishments including: 

  • Fielding and commissioning an independent assessment of 22 faster payments solution proposals against the Faster Payments Effectiveness Criteria released in February 2016, 19 of which voluntarily progressed through a review by the over 500 participants of the two task forces
  • Analyzing potential challenges to successful faster payments implementation, focusing on provider interoperability, rules and standards, governance, adoption, safety and security
  • Publishing part one (Off-site Link) of a two-part final report that provides a high-level overview of the task force’s background and processes, the payments landscape and the benefits of faster payments

The Faster Payments Task Force expects to publish the final report, The U.S. Path to Faster Payments, including part two in mid-2017. Part two will include:

  • An in-depth report covering the assessment of faster payments solution proposals
  • Challenges and opportunities for achieving faster payments in the United States
  • Task force recommendations and suggestions for industry action


Payments Security

The Secure Payments Task Force (Off-site Link) was established in June 2015 to advise the Federal Reserve on payment security matters, coordinate with the Faster Payments Task Force and determine payment security priorities for future action. During 2016, the task force launched work to address the industry’s most pressing payment system security issues: identity management, data protection and fraud and risk information-sharing. The task force also accomplished key steps towards finalizing the resources listed below, which are expected to be released to the payments industry beginning in 2017: 

  • Map of existing identity management practices in end-to-end payment flows in order to identify opportunities
    for improvements
  • Guiding principles for protecting sensitive data associated with payments, serving as a foundation for building a more comprehensive data protection framework for industry participants
  • Inventory of current industry efforts to share information for fraud and risk prevention and mitigation

In 2017, the Secure Payments Task Force plans to:

  • Outline ways for the industry to improve payment identity management practices
  • Provide guidance on standardizing definitions of fraud and risk data so it can be easily interpreted and acted upon
  • Publish a framework for protecting sensitive payment data


Payments Efficiency

Electronic Payments
The Federal Reserve supports the work of the Business Payments Coalition (Off-site Link) (formerly the Remittance Coalition), including the drive for valuable industry collaboration on standards, directories and business-to-business payments improvements. In 2016, the Coalition worked to:

  • Expand the scope of the Small Business Payments Toolkit (Off-site Link) to reflect ongoing growth and changes in the
    payments system
  • Publish information regarding the challenges and opportunities in e-invoicing options
  • Support the Business Payments Coalition Business-to-Business (B2B) Directory steering committee as it begins defining the requirements, governance and operational models for the Business Payments Directory Association
  • Developed information on understanding the implementation of the ISO® 20022 messaging format for corporates

ISO 20022 Standard
Efforts to adopt the International Organization for Standardization (ISO) 20022 (Off-site Link) messaging format, a common “language” for global financial communications, continued as well. The Federal Reserve published the detailed implementation plan and timeline for the ISO 20022 format for wire transfers and continued work on use case development for Automated Clearing House (ACH) adoption or integration. Industry collaboration will continue in 2017, as will broad education and engagement opportunities covering how the messaging format will drive standardization and efficiencies in a global economy.


Enhanced Federal Reserve Financial Services

The Federal Reserve employs the progressive work across the payments system to support the delivery of faster, safer, more efficient payments. In an effort to support enhanced payment speed, Federal Reserve Financial Services successfully deployed enhancements to the FedACH® SameDay Service to support Phase 1 of the NACHA® Same Day Initiative. The effort helps ensure the continued drive toward a ubiquitous, same-day capability for virtually any ACH transaction and accelerated clearing, settlement and funds availability. In 2017, Federal Reserve Financial Services will support Phase 2 of the initiative.


Opportunities to engage

There will continue to be opportunities for all stakeholders to contribute to the task force work and other strategy efforts. To get involved or to learn more, visit (Off-site Link). You can submit questions and comments at any time via the Contact Us (Off-site Link) page.

To stay aware of upcoming events and developments, follow us on Twitter @fedpayimprove (Off-site Link) and join the FedPayments Improvement Community (Off-site Link). Review the Fed and Industry events (Off-site Link) listing to visit with us in person regarding initiatives supporting U.S. payment system improvements.


“NACHA” is a registered trademark of NACHA–The Electronic Payments Association.

“ISO” is a registered service mark of International Organization for Standardization.


Industry Perspective

The 2016 Federal Reserve Payments Study highlights strong trends in card use

February 2017

The 2016 Federal Reserve Payments Study, released December 22, 2016 (PDF) and conducted triennially since 2001, examines noncash payment trends in the United States. The Study’s findings show that credit and debit card payments have continued to gain ground, accounting for more than two-thirds of all core noncash payments in the U.S. from 2012 through 2015. Just over a decade ago, checks were the predominant type of noncash payment in the U.S.

Trends in noncash payments are influenced by many factors, including:

  • Technological and financial innovations
  • Changes in consumer and business financial behavior
  • Economic activity
  • Regulatory developments

Trends in noncash payments 2000-2015, by number

Trends in noncash payments 2000-2015, by number

SOURCE: Federal Reserve Board

The Initial Data Release Report (PDF) presents highlights and data from the 2016 Study. Additional detailed information will be released in 2017 as the results of further analysis become final. Also, beginning in 2017, some survey data will begin to be collected annually, rather than every three years, to enhance the value of the Study by providing the industry with updated key estimate information in between the larger triennial studies.

The table below shows the estimated number and value of 2015 U.S. noncash payments as well as the rate of change since 2012. 

Payment type2015 number of payments2015 value of paymentsChange in number of payments since 2012Change in value of payments since 2012
Debit cards (including prepaid and non-prepaid) 69.5 billion $2.56 trillion 13.0 billion
(7.1 percent)
$0.46 trillion
(6.8 percent)
Credit cards 33.8 billion $3.16 trillion 6.9 billion
(8.0 percent)
$0.61 trillion
(7.4 percent)
Automated Clearing House (ACH) 23.5 billion $145.30 trillion 3.1 billion
(4.9 percent)
$16.29 trillion
(4.0 percent)
Checks 17.3 billion $26.83 trillion -2.5 billion
(-4.4 percent)
-$0.38 trillion
(-0.5 percent)
Total 144 billion $178 trillion 21 billion
(5.3 percent)
$17 trillion
(3.4 percent)

Other key findings include:

  • The change in the number of debit card payments (including payments with prepaid and non-prepaid cards) was the largest increase in number of payments among the payment types considered. Most of this growth occurred in non-prepaid debit card payments.
  • Credit card payments saw the largest growth rates among the payment types considered.
  • The decline of checks between 2012 and 2015 was slower than previous studies had shown for prior periods since 2003.
  • Payments with general-purpose cards using embedded microchips, which improve the security of in-person payments to help prevent fraud, have grown by 230 percent per year since 2012. But payments with the chip-based cards amounted to only about a 2 percent share of total in-person general-purpose card payments in 2015, reflecting the early stages of a broad industry effort to roll out chip card technology.
  • In 2015, the proportion of total general-purpose card fraud by value attributed to counterfeiting, the most prevalent type of in-person card fraud in the U.S., was substantially greater than in countries where chip technology has been more widely adopted.

“Payment industry participation drives the quality of the Study’s results. The Federal Reserve appreciates the industry’s response in 2016 and looks forward to working with selected participants for the annual data collection getting underway in the first quarter of 2017.”

Mary Kepler
Senior Vice President
Federal Reserve Bank of Atlanta


Payment trends through the years

To learn more about how noncash payments have evolved over time, review past Federal Reserve Payments Studies and their key findings below.

2004 (PDF)

  • Electronic payments exceeded check payments for the first time in history, fueled by growth in debit card usage and the conversion of checks into ACH payments.

2007 (PDF)

  • More than two-thirds of all U.S noncash payments were made electronically. All types of electronic payments grew while check payments decreased.

2010 (PDF)

  • More than three-quarters of all U.S. noncash payments were made electronically, emphasizing consumers’ increasing adoption of electronic alternatives for payments in the U.S.

2013 (PDF)

  • Card payments — credit and debit — accounted for more than two-thirds of all noncash payments, with the number of debit card payments increasing more than any other payment type from 2009 through 2012.

2016 (PDF)

  • Payments made with cards using embedded microchips have grown by 230 percent per year since 2012, but still only amounted to only about 2 percent share of total card payments in 2015, reflecting the early stages of a broad industry effort to roll out chip card technology.

Also in this issue ...

Can't get enough numbers? Check out the article "Fed Facts: A look at the numbers" for a variety of Federal Reserve stats.


The Federal Reserve partnered with McKinsey & Company on the DFIPS and CSS, and with Blueflame Consulting, of Melrose, Massachusetts, on the NPIPS. The information collected in each survey is combined with information about payments trends from previous studies and then analyzed to produce comprehensive estimates not available in other studies.



Fed Facts: A look at the numbers

February 2017

The Federal Reserve Banks offer services, programs and a comprehensive suite of products to facilitate the day-to-day payment operations of financial institutions nationwide. For this month’s Fed Facts article, we’re displaying a collection of statistics about Federal Reserve Financial Services, including 2016 transactions processed by the Federal Reserve Banks and other Fed initiatives related to payment systems.1 In addition to the graphics below, you can also view some of the following information as a table (PDF), and you can find a range of other statistics on the Board’s Payment Systems (Off-site Link) page.


Fostering safety and efficiency

One of the key functions (Off-site Link) of the Federal Reserve System is to foster payment and settlement system safety and efficiency by offering services to the banking industry and the U.S. government that facilitate U.S.-dollar transactions and payments.

A major step forward in payments efficiency was the implementation of the Check Clearing for the 21st Century Act (Check 21) in October 2004. Just 12 years later, only 0.01 percent of checks were collected as paper items. The vast majority of checks processed by the Fed today are deposited and presented electronically using our suite of Check 21-Enabled Services.

Other Federal Reserve Financial Services offerings include FedACH® Services, the Fedwire® Funds Service, the Fedwire Securities Service and the National Settlement Service. These services are all available through our suite of FedLine® access solutions, which use state-of-the-art technology to facilitate the reliable, highly secure clearing of payments and securities transfers, and the exchange of related information for financial institutions and their business and consumer customers. Over 110,000 users in nearly 10,000 financial institutions leverage FedLine access solutions for delivery of transaction and information services to the back office, front counter and end user.

The graphics below show processing numbers for Check and FedACH, and Fedwire transactions processed by the Fed:

Check and FedACH

Fedwire Funds Service and Fedwire Securities Service


Managing your Federal Reserve account and reviewing billing information associated with the above services has been streamlined for the 42,692 users with access to the Fed’s Account Management Information (AMI). AMI is a powerful online tool that offers critical real-time information regarding your Federal Reserve account. AMI enables customers to drill down, search and download summary and detail information. For a summary of features and benefits view the AMI Value Grid.


Making payment system improvements a top priority

A safe, efficient and broadly accessible payment system is vital to the U.S. economy. The Federal Reserve plays an important role in promoting these qualities as a provider of payment services to financial institutions and the U.S. Treasury. As a leader and catalyst for change, the Fed is calling on all stakeholders to seize this opportunity and join together to improve the payment system. The Strategies for Improving the U.S. Payment System (Off-site Link) paper, which has been downloaded over 100,000 times since it was released in January 2015, outlines five strategies and five desired outcomes for collaborating with payment system stakeholders to enhance the speed, safety and efficiency of the U.S. payment system. (Off-site Link) details the Herculean efforts underway, which include:

Strategies for Improving the Payment System



Focusing on streamlined and cost-effective operations

The Federal Reserve Banks help ensure that depository institutions have sufficient supplies of currency and coin to meet public demand. The 28 Federal Reserve Bank cash offices provide cash services to approximately 8,400 banks, savings and loans and credit unions in the U.S. Did you know that since the 1980s the demand for U.S. currency has grown at a steady pace? You can find some interesting stats on the Cash Product Office’s Infographic on U.S. Currency in Circulation (Off-site Link).

The U.S. Treasury’s Savings Bond Program has a rich history (Off-site Link) of changing to meet the needs of the American investor. In the early years, savings bonds were a significant contributor to financing the U.S. government’s debt. Today, they continue to be an important savings and investment tool for individuals. The Federal Reserve partners with over 16,000 paying agents that redeem savings bonds on behalf of the U.S. Treasury. In 2016, nearly 20 million savings bonds were processed. Check out the currency and savings bond processing numbers below:

Currency and Savings Bond Processing



Posting resources at your fingertips

With nearly 700 pages and 9,345,465 visits in 2016, offers a wealth of information about Federal Reserve Bank Services. Our E-Payments Routing Directory — offered as a service to financial institutions to help them settle and process transactions efficiently — is the number one most-visited page on the website! Other resources include:

Online Resources


We also added a new online resource to our arsenal when we launched our @FRBservices (Off-site Link) account in December 2015. Since then, nearly 490 Twitter followers have viewed over 240 tweets a total of over 107,000 times.


Providing support for our customers

Each and every day, financial institutions count on the streamlined flow of payments and the effortless exchange of information. Many of the statistics presented here are impressive, but stats are just cold, hard numbers if the human element is not factored in. Customer service and support play a critical part in achieving a payment system that operates at peak performance. When you need assistance or have a question about our Fed products or services, you can always reach out to your account executive. Representatives in the Customer Contact Center (CCC) can assist with both technical and service setup support for our FedLine access solutions. Plus, there are plenty of opportunities to get help as reflected below:

Customer Support



Making sense of all the numbers 

If you’re a numbers geek, you undoubtedly got your fill of stats with this article. You’ll find plenty more in the article “The 2016 Federal Reserve Payments Study highlights strong trends in card use” that details the initial data release report from the 2016 Federal Reserve Payments Study. Coming up in the March Fed Facts article, we plan to provide you with a closer look at some of the Federal Reserve Financial Services highlighted in this article.


1 Unless noted, the stats presented were calculated from January 1 through December 31, 2016, and reflect transactions processed by the Federal Reserve Banks.


FedCash® Services

The State of Cash: Preliminary Findings from the 2015 Diary of Consumer Payment Choice

February 2017

On November 3, 2016, the Federal Reserve Bank of San Francisco’s Cash Product Office published a research paper entitled “The State of Cash: Preliminary Findings from the 2015 Diary of Consumer Payment Choice(Off-site Link), written by Wendy Matheny, Shaun O’Brien and Claire Wang. We are sharing a reprint of the paper below, which describes preliminary findings from the Diary of Consumer Payment Choice, a survey of a nationally representative sample of U.S. consumers on all their daily transactions — purchases, bill payments, deposits, withdrawals, etc. — from October 16 to December 15, 2015.


Executive Summary

As the payments landscape evolves, cash remains a unique, resilient, and heavily used consumer payment instrument. Still, with new payment options and ways to shop, consumers are adapting how they view and use cash. The Diary of Consumer Payment Choice (Diary) serves as the Cash Product Office’s (CPO) primary data source on consumer payment behavior. Insights from the Diary, and other data sources, help the CPO understand the role that cash will play in the future. This research helps the Federal Reserve (Fed) fulfill its objectives of maintaining confidence in U.S. currency and promoting a safe and efficient payment system.

When first conducted in 2012, the Diary showed that cash was the most frequently used payment instrument and that cash use was prevalent across all demographic groups. The key findings of the 2015 Diary of Consumer Payment Choice are similar and suggest that:

  • Cash continues to be the most frequently used consumer payment instrument
  • Cash is widely used in a variety of circumstances
  • Cash dominates small-value transactions
  • The average value of cash holdings has grown

The 2015 results also show that cash is facing competition from other payment instruments. In 2015, 32 percent of consumer transactions were made with cash, compared with 40 percent in 2012. Growing consumer comfort with payment cards and the growth of online commerce, among other factors, contribute to this trend. Nonetheless, a broad range of results suggests that cash remains resilient and continues to play a key and unique role for consumers.

The first section of the paper discusses high-level, aggregate trends in cash demand and in financial institutions’ currency orders and deposits with the Fed. The second section focuses on four findings about cash use from the 2015 Diary, outlined above. The final section explores three insights that the 2015 data give us on consumer payment preferences and practices.


Background: High-level Trends Suggest Cash Use is Evolving

Despite innovations in smartphone technology and mobile payment apps, Fed data on the amount of currency in circulation suggest that demand for cash is strong. Figure 1 shows currency in circulation from January 1980 to August 2016 and includes notes held by merchants, financial institutions, and consumers. The amount of currency in circulation has increased steadily over time, and demand for higher denominations has accelerated in the years since the 2008 financial crisis.

Figure 1: Currency in Circulation

Currency in Circulation


This steady growth in cash demand contrasts with the moderation the Federal Reserve is seeing in its payments to and receipts from depository institutions (Figure 2). Fed payments and receipts grew modestly after the implementation of the 2006 Recirculation Policy and have declined slightly since 2014. Concurrently, the gap between payments and receipts has grown since 2009, contributing to the more rapid growth in currency in circulation over this period.

Figure 2: Annual Total Reserve Bank Payments and Receipts

Annual Total Reserve Bank Payments and Receipts


Taken together, these two perspectives suggest a potential change in how consumers, businesses, and financial institutions are using and handling cash. The moderation and slight decline in Fed receipts could mean, among other explanations, that consumers are using cash less frequently to pay for purchases. At the same time, continued growth in currency in circulation may mean that, in a low-interest rate environment, consumers and merchants are comfortable holding more cash, possibly for contingency purposes.

The Diary data offer more detailed insights into how consumers are using cash and how their behavior may contribute to the trends discussed above.


Key Findings from the 2015 Diary of Consumer Payment Choice

Finding 1: Cash is the most frequently used retail payment instrument
In 2015, cash remained the most frequently used retail payment instrument, used in nearly one-third (32 percent) of all transactions, including bill payments (Figure 3). Consumers used debit cards for 27 percent of their transactions, followed by credit cards for 21 percent of transactions. Electronic payments (e.g. ACH transfers and online bill pay) and checks comprised a small share of transaction volume, though the value of these payments tended to be higher than cash, debit, or credit payments.

Figure 3: Share of Transaction Number by Payment Instrument

Share of Transaction Number by Payment Instrument


Compared to 2012, cash’s share of transactions in 2015 declined approximately eight percentage points, from 40 percent to 32 percent. Consumer use of debit and credit cards increased two and four percentage points, respectively, and account for 48 percent of all reported transactions in the 2015 data.

Cash’s decline in transaction share can be attributed to two types of factors: (1) fundamental changes in consumer behavior and preferences and (2) structural changes to the Diary survey tool.

Fundamentally, consumer preferences and shopping behavior appear to have changed as consumers increasingly use non-cash payment instruments. Fewer people cited cash as their preferred payment instrument (see Insight 1 below), and consumers are increasing the amount of shopping they do online or through remote platforms. The share of transactions that took place online or remotely increased to 10 percent in 2015, up from 6 percent in 2012.

Structurally, changes to the survey instrument and a different panel of diarists may have contributed to part of the change in cash’s share of transactions in 2015. The addition of a bill payment module at the end of the third Diary day provided a more accurate record of bill payments, increasing the share of reported electronic payments. The 2015 Diary participants also recorded fewer small-value transactions.1 As cash tends to be used for small-value transactions, the lower number of reported small-value transactions disproportionately diminished cash’s share of total transactions. Appendix I provides more information on changes between the 2012 and 2015 Diaries.

Figure 42 looks at each payment instrument’s share of total payment value and further demonstrates the impact of the 2015 Diary’s changes in small-value transactions and bill payments. Cash, and its concentrated use for small-value transactions, accounted for 9 percent of total payment value. Credit and debit cards, combined, accounted for 34 percent of the total value spent, while electronic payments made up 35 percent. 

Figure 4: Share of Value by Payment Instrument

Share of Value by Payment Instrument


Cash’s share of total payment value decreased five percentage points, while check, credit cards, and debit cards remained the same, and electronic payments’ share increased eight percentage points. The data show that cash and electronic payments can be thought to have opposite consumer uses: cash is used most often for small-value purchases, while electronic payments are used less frequently, but primarily for large-value purchases and bill payments.

Finding 2: Cash is widely used, even when other options are available
Despite its decline in share of reported transactions, cash was used for a variety of merchant categories, even when other payment options were available. Figure 5 shows the different payment instruments used for various spending categories and shows that cash is the most used payment instrument in six of nine merchant categories. Gifts and transfers to people, where cash was used for 75 percent of transactions, was the category with the highest share of cash transactions. Other cash-intensive categories included government and nonprofit purchases (40 percent), food and personal care supplies (39 percent), and auto- and vehicle-related purchases (39 percent). Merchant categories where cash is used less than 20 percent of the time were housing-related purchases and financial, professional, miscellaneous services. These categories traditionally involve larger transactions that are paid with non-cash instruments.

Figure 5: Payment Instrument Use by Spending Category

Payment Instrument Use by Spending Category


As with the 2012 Diary, cash remains the most or the second most used payment instrument in a majority of merchant categories. However, cash’s share of transactions within each category was quite different between 2012 and 2015. For example, cash’s share within gifts and transfers to people, housing-related, and auto- and vehicle-related purchases increased eight, six, and five percentage points, respectively. Even with the availability of peer-to-peer (P2P) money transfer apps like Venmo and PayPal, cash continues to be the most popular choice for P2P payments. In contrast, cash use declined for food and personal care supplies and general merchandise by 12 and nine percentage points, respectively, which reflects in part the decline in the reported number of small-value transactions.

Figure 6 shows the 2015 Diary’s cash transactions and the various merchant categories into which they fell. Food and personal care supplies, auto- and vehicle-related, general merchandise, and gifts and transfers to people comprised nearly 90 percent of cash transactions. Together, the data from Figures 5 and 6 highlight an important point: a merchant category may have high cash use, but that category may make up only a small share of total cash transactions. Using gifts and transfers to people as an example, while 75 percent of P2P transactions were made in cash, only 11 percent of cash transactions were used for P2P payments. Therefore, changes in cash use for a cash-intensive category like food and personal care supplies yield a greater impact on total cash transactions, compared to similar changes in less cash-intensive categories.

Figure 6: Cash Spending Categories

Cash Spending Categories


Finding 3: Cash dominates small-value payments
In 2015, cash continued to dominate small-value transactions, with cash being used for more than 50 percent of transactions under $25. As shown in Figure 7, cash was used for more than 60 percent of purchases under $10. For purchases between $10 and $24.99, cash was used 42 percent of the time. Between 2012 and 2015, the share of cash transactions under $10 fell five percentage points and cash’s share of purchases ranging $10 to $24.99 declined seven percentage points. Nonetheless, overall cash use for small-value transactions remains high.

Figure 7: Payment Instrument by Amount, In-Store 2015

Payment Instrument by Amount, In-Store 2015


One potential explanation for cash’s large share of small-value transactions is that merchants either do not accept debit or credit cards, or they require a minimum purchase to accept cards. However, the 2015 Diary found little evidence that small-value cash transactions were driven by a lack of merchant card acceptance or merchant-imposed transaction minimums for card use. The findings suggest that consumers are using cash for small-value transactions out of convenience, not merchant-specific pressures (see box below).

Most in-store transactions (63 percent) fall into the under $25 value range. The large share of purchases in this price range, combined with consumers’ propensity to use cash for purchases in this price range, explains why cash is still the most frequently used payment instrument. However, if merchants increase their online presence and consumers shift shopping activity to electronic and mobile channels, cash’s share of transactions—including small-value transactions—could decline.


Card acceptance and minimums had little impact on cash use for small-value transactions

For each recorded transaction, Diary participants recorded whether the merchant accepted payment cards and, if so, whether there was a minimum purchase required to use a card. Figure 8 shows participants’ responses by merchant category.

Figure 8: Card Acceptance Rate by Merchant Type

Card Acceptance Rate by Merchant Type

Card acceptance was high among most merchants, even those in traditionally cash-intensive sectors like food and personal care supplies. This high level of card acceptance comes as innovations like card readers and Quick Response (QR) scanners gain popularity. Despite high levels of card acceptance, consumers continue to use cash for small-value transactions.

The 2015 Diary also asked participants whether merchants required a minimum purchase before accepting a payment card. Most participants either did not encounter a minimum purchase requirement or did not know whether a minimum purchase was required, suggesting that the presence or absence of a minimum was not an issue for that transaction. In all spending categories, 89 percent or more of transactions took place without requiring a minimum. Even for small-value transactions, required minimums did not appear to drive cash use.

Finding 4: Average value of consumer cash holdings increased slightly
The majority of U.S. consumers continue to carry cash. Nearly 83 percent of diarists held cash at the end of at least one day of the Diary reporting period, and 69 percent held cash at the end of all three days. The average amount of cash that diarists held each day increased from $55 to $59 between 2012 and 2015 (Figure 9).

Figure 9: Average Cash Holding

Average Cash Holding


Though consumers’ average cash holding increased, the median value declined from $29 to $21 between 2012 and 2015. The divergence between the median and average values indicates that some participants above the median held substantially more cash in 2015 than in 2012. More than half (52 percent) of participants held less than $25 on average in 2015, compared to 45 percent in 2012 (Figure 10).

Figure 10: Average Cash Holding Amount

Average Cash Holding Amount


Consumers also appear to be changing how frequently they hold cash (Figure 11). During the Diary reporting period, most diarists moved to one of two extremes, either ending all three days holding some cash or ending all three days holding zero cash. A larger share (17 percent) did not hold cash during their 2015 Diary period, compared to 11 percent in 2012. Similarly, a larger share (69 percent) ended all three days of the Diary with cash, up from 64 percent in 2012. 

Figure 11: Cash Holding Frequency

Cash Holding Frequency


Diary participants’ movement toward the extremes suggests that consumers’ relationship with cash is evolving. They are either no longer holding cash, or they are holding it more frequently and in larger amounts. These habits may suggest that, for those who continue to hold cash, its function as a backup payment option is gaining traction. For those holding less cash or not holding it at all, cash’s role as a transactional payment instrument has diminished; for these consumers, cash’s usefulness as a back-up instrument may not be compelling enough to carry it.


Insights on Consumers and Consumer Preference

Insight 1: Consumers’ stated preferences influence how they pay
The 2015 Diary asked which payment instrument each participant preferred to use for non-bill purchases, bill payments, and online payments. For non-bill purchases, 43 percent of diarists cited debit cards as their preferred payment instrument. For the remainder of participants, the shares of people citing credit cards and cash were roughly even, at 27 percent and 26 percent, respectively (Figure 12).

Figure 12: Primary Payment Preferences

Primary Payment Preferences


Compared to the 2012 Diary, the 2015 Diary showed changing consumer payment preferences. In both years, debit cards were cited as the most popular payment instrument. However, in 2015, the share of participants preferring credit cards increased five percentage points, while cash’s share declined by four percentage points from 2012. As credit availability and economic conditions have improved since the financial crisis, consumer preferences appear to have shifted somewhat from cash to credit cards.

While the majority of consumers prefer cards, cash remains the most preferred backup payment instrument. When asked what payment instrument they preferred if their primary option was unavailable, 55 percent of people who prefer checks, debit cards, or credit cards chose cash (Figure 13).

Figure 13: Backup Payment Preferences

Backup Payment Preferences


Insight 2: Consumers who prefer and use cash are a diverse group
Contrary to conventional wisdom, consumers who prefer and use cash are a diverse group. When it comes to age, the Diary shows that many younger consumers are actually cash “lovers.”3 Although the share of people preferring cash declined across all age groups between the 2012 and 2015 Diaries, those in the 18 to 24 years category included the largest share of people who prefer cash, at 38 percent (Figure 14). Nearly a quarter of every other age group selected cash as their primary preference.

Figure 14: Primary Payment Preference by Age

Primary Payment Preference by Age


This age-agnostic pattern carries over to cash use as well (Figure 15). Consumers 65 and older made the most cash transactions, averaging 36 percent of their total monthly transactions. Every age group made more cash transactions than credit card transactions, and cash transactions continued to comprise at least 24 percent of each age group’s total reported transactions. Comparing 2012 to 2015, however, cash use dropped the most for participants between 35-44 years, who had the smallest share of transactions made with cash. This group saw a decrease in their number of cash transactions, with cash’s share falling from 40 percent in 2012 to 24 percent in 2015.

Figure 15: Payment Instrument Use by Age

Payment Instrument Use by Age


Income has a strong influence on payment preference (Figure 16), but not on cash use (Figure 17). Households earning less than $25,000 annually have a particularly strong cash preference, with 48 percent preferring cash, down from 55 percent in the 2012 Diary. Households earning greater than $75,000 annually saw a two to three percentage point increase in cash preference, though households earning $150,000 and greater continued to exhibit the smallest cash preference at 14 percent.

Figure 16: Primary Payment Preference by Income

Primary Payment Preference by Income


Figure 17: Payment Instrument Use by Income

Payment Instrument Use by Income


Despite their stated preferences, in 2015, nearly everyone uses cash. As in 2012, all income groups made roughly the same number of monthly cash transactions in 2015 (approximately 15 transactions per month). However, households with greater incomes made more transactions overall, and as a result, made a smaller share of their total transactions in cash.

People who use cash are not limited to specific demographic groups. Even if consumers cite a preference for cards, many continue to make cash purchases, and cash spending occurs across all demographic groups. 

Insight 3: Consumer cash holdings vary by demographics
The 2015 Diary showed that consumers tend to hold cash regardless of their payment preferences. However, age and income have some influence on how much cash consumers hold.

Average cash holdings tend to increase with age (Figure 18). The 65 and older age group held the highest amount of cash, averaging $99 each day, an increase from the $80 average held in 2012. At the other end of the spectrum, consumers 18-24 years held the least cash, though they increased their average holdings, from $25 in 2012 to $31 in 2015. The biggest decrease in cash holdings was seen in the 35-44 years age group, which decreased their average holding from $53 to $36 between 2012 and 2015.

Figure 18: Average Cash Holdings by Age

Average Cash Holdings by Age


Income plays a role in cash holdings as well (Figure 19). In 2012, participants in higher income households held greater amounts of cash. In 2015, this pattern continued, though the disparity across income groups is less stark. Households earning less than $25,000 held the smallest average amount of cash at $37, a decrease from the $49 they held in 2012. Households earning $150,000 and greater held the highest amount, holding an average of $92 per day. Households earning between $25,000 and $150,000 held roughly similar amounts on average, between $57 and $75 per day.

Figure 19: 2015 Average Cash Holdings by Household Income

2015 Average Cash Holdings by Household Income




The 2015 Diary results suggest that cash remains a highly valued and useful payment instrument. Cash is still the most frequently used payment instrument. A wide variety of people prefer cash, and even those who prefer another payment instrument still use cash frequently. Cash is often favored for its convenience, particularly for specific use cases such as P2P transfers and small-value transactions.

Cash’s declining share of total payments is indicative of the growth of non-cash payment instruments and new ways to shop online or remotely.4 While cash’s share may be declining, continuing growth in currency in circulation points to cash’s significance in the economy.

The Federal Reserve Banks of Boston, Richmond and San Francisco will continue to field the Diary of Consumer Payment Choice in the future. These and other studies will provide ongoing insight into cash’s role in the economy, and will inform the CPO’s operations and long-term strategic planning.

The views in this paper are solely the responsibility of the authors and should not be interpreted as reflecting the views of the Federal Reserve System.

About the Diary of Consumer Payment Choice

The Diary of Consumer Payment Choice is a survey designed to study the purchase and payment behavior of U.S. consumers. The study is conducted using a nationally representative sample of U.S. consumers. The second fielding of the Diary of Consumer Payment Choice (Diary) took place from October 16 to December 15, 2015. Participants were asked to record information on all transactions—purchases, bill payments, deposits, withdrawals, etc.—conducted during an assigned consecutive three-day period.

The 2015 Diary is the second iteration of a research initiative by the Federal Reserve Banks of Boston, Richmond, and San Francisco. The initial Diary, conducted in 2012, found that cash was a valuable payment instrument for a significant portion of consumers and businesses. In the 2012 study, consumers used cash more frequently than any other payment instrument, and cash played a dominant role for small-value transactions and for key demographic groups like lower-income consumers.


About the Cash Product Office

As the nation’s central bank, the Federal Reserve ensures that cash is available when and where it is needed, including in times of crisis and business disruption, by providing FedCash® Services to depository institutions and, through them, to the general public. In fulfilling this role, the Fed’s primary responsibility is to maintain public confidence in the integrity and availability of U.S. currency.

The Federal Reserve System’s Cash Product Office (CPO) provides strategic leadership for this key function by formulating and implementing service level policies, operational guidance, and technology strategies for U.S. currency and coin services provided by Federal Reserve Banks nationally and internationally. In addition to guiding policies and procedures, the CPO establishes budget guidance for FedCash® Services, provides support for Federal Reserve currency and coin inventory management, and supports business continuity planning at the supply chain level. It also conducts market research and works directly with financial institutions and retailers to analyze trends in cash use.


Appendix I

Changes to the 2015 Diary of Consumer Payment Choice Structure
For both the 2012 and 2015 Diaries, participants tracked all transactions (deposits, withdrawals, purchases, bills, etc.) for an assigned, consecutive three-day period within the observation window. In 2012, the observation window was the month of October. The 2015 Diary expanded the observation window to two months, from October 16 to December 15. This extended timeframe allowed researchers to observe payment choice and purchase behavior through part of the 2015 holiday season.

Approximately 2,500 participants completed the 2012 Diary. Slightly fewer than 1,500 participated in 2015. To increase the number of observations for the 2015 Diary, 500 of the 1,500 participants took the Diary a second time, approximately one month after their initial completion. This repeat participation had the benefit of allowing researchers to assess whether individuals changed their behavior during the holiday season.

Other additions to the 2015 Diary included:

  1. A separate bill payment module at the end of a diarist’s third day to improve bill payment records during the observed diary period
  2. Follow-up questions regarding card acceptance to determine whether individuals were using cash for convenience or out of necessity
  3. Additional preference questions to allow participants to specify different payment preferences based on transaction value and on whether the purchase took place in-person or not

The 2015 Diary also revealed a marked change in the total number of transactions and small-value transactions when compared to the inaugural 2012 study. This reduction likely impacts small-value transactions that took place in-person and had a high probability of cash use. More information about this reduction can be found in the paper “Measures of Cash Use from a New Payments Diary” (forthcoming) by the Consumer Payment Research Center located at the Federal Reserve Bank of Boston.


1See “Measures of Cash Use from a New Payments Diary” (forthcoming) by the Consumer Payment Research Center, located at the Federal Reserve Bank of Boston, on potential reasons why small-value transactions were lower.

2Please note that some percentages in the following charts may not add to 100 due to rounding.

3Bloomberg (August 2014). “Young Americans Hate Cash” (Off-site Link).

4Federal Reserve Bank of San Francisco. 26 April 2016. Shopping Experience Trends and their Impact on Cash (Off-site Link).


Events and Education

Be sure to meet up with a Fed expert during spring conference season

February 2017

The Federal Reserve Banks participate in events and conferences across the country throughout the year. It’s an excellent way to keep up with what’s going on in the industry, hear engaging speakers, discuss the latest news and meet with colleagues. The learning experiences and face-to-face interactions are priceless.

Federal Reserve staff, whether attending or exhibiting at a conference, are always happy to speak with customers about our latest services and offerings. Below are just some of the events around the country that our Fed experts will attend this spring. Check out the Industry Events page for a full list of 2017 events that we will attend. We encourage you to bookmark this page to check back for updates. We hope to see you at an event this year!


2017 EventsDatesLocations
Information Interchange 2017 (Off-site Link), hosted by ePay Resources and the Federal Reserve Bank of Atlanta, is an opportunity to learn the latest information on payments strategies, operations and technology solutions and risk and compliance issues. February 14-16 Orlando, FL
The Credit Union National Association (CUNA) Governmental Affairs Conference (Off-site Link) is the year’s biggest credit union advocacy event. Meet representatives and legislators and discuss key issues. February 26-March 2 Washington, DC
The Wisconsin Automated Clearing House Association (WACHA) 2017 Electronic Payments Conference (Off-site Link) covers hot topics including ACH, Check, Card, Treasury Management and more. March 7-9 Middleton, WI
Independent Community Bankers of America (ICBA) Community Banking LIVE (Off-site Link) brings together the community banking industry to learn and engage with rich educational content and networking opportunities. March 15-19 San Antonio, TX
Ohio Bankers League (OBL) 2017 Technology Conference (Off-site Link) covers IT and operational educational opportunities and hot topics, including protecting your bank in a digital world. April 5-6 Columbus, OH
National Automated Clearing House Association (NACHA) Payments 2017 (Off-site Link) brings together players and thought-leadership that are propelling the industry dialogue forward to continue to strengthen the U.S. payments ecosystem. April 23-26 Austin, TX
TRANSACT Powered by ETA (Off-site Link) has extensive networking events, education and a robust exhibit hall all focused on technology, security trends and policy affecting the payments industry. May 10-12 Las Vegas, NV


The Federal Reserve Banks do not sponsor or endorse any of the non-Federal Reserve Bank-related products, parties or entities discussed in this publication.



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