One of the notoriously slippery areas in payment research is that of documenting consumers’ use of cash. We know there are huge numbers of small cash-based payments, and getting research subjects to record all those transactions in a way that can drive accurate projections is difficult and expensive. The Federal Reserve does about the best job that can be done though its payments diary study (see https://www.frbatlanta.org/-/media/documents/banking/consumer-payments/research-data-reports/2017/the-2016-diary-of-consumer-payment-choice/rdr1707.pdf for the latest estimates), and their conclusion is that consumers’ cash use is in a slow decline. Cash’s share of consumer payments declined an estimated 1.8% annually from 2012 to 2015 and 2.5% from 2015 to 2016.
The other side of the coin (so to speak) is that consumers appear to value their ability to use cash far beyond what might be expected for a “dying” method of payment. Mercator Advisory Group’s new Consumer Merchant Experience survey of 3,000 U.S. adults (fielded February 2018) was designed to define and highlight consumer expectations for optimal experiences with merchants. Consumers rated a menu of 74 in-store, online, and doing-business-with experiences they might have with merchants, ranging from rewards participation to knowledgeable staff to mobile self-checkout technology. As with any good study, there were some surprises in store (so to speak) about what shoppers consider to be high-quality merchant experiences, including some strong reminders not to overlook the basics (example: Don’t mess with my free shipping for online purchases).
On the payments front, a couple of themes consistently made shoppers’ priority list: (1) I value having a choice of payment methods, and (2) I value the ability to pay with cash in-store. Both payment choice and the ability to use cash were significant predictors in a consumer segmentation model we developed based on analysis of the 74 shopping experience items. Ability to pay with cash in-store was highly rated by 4 out of 5 segments– including, to our surprise, our “Millennials, Minorities, and Techies” segment.
At a time when some nations are becoming concerned that declining cash use might actually lead banks to limit their customers’ cash withdrawals, driving to a potential crisis during an electronic payments outage (see https://www.bloomberg.com/news/articles/2018-06-11/sweden-tries-to-halt-total-cashlessness-with-lawmaker-proposal), it is interesting to see U.S. consumers’ continuing affinity for use of cash, not as a payment-method-of-last-resort, but as part of a quality merchant experience. Take for example Shake Shack, which recently found out through an in-store trial that customers do not react favorably when payment options exclude cash (see https://www.paymentsjournal.com/taking-a-payment-option-away-is-tough/). The Federal Reserve study tells us that consumers carried an average $57.20 on their person in 2016; many merchants would be pleased to access those funds through incremental sales! The last fun fact on this topic: Over one-third of our Customer Merchant Experience survey respondents had visited an in-store ATM in the previous year – for them, the ATM and its cash were themselves the desired in-store experiences.
So don’t retire the cash drawers. Dust off that in-store ATM. Customers are watching and evaluating their merchant experiences, and the sight of cash still makes them happy.