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1 Consumer Behavior before & during Covid-19 Data from national payments surveys Talk About Payments November 19, 2020 The views expressed in this presentation are those of the author and do not necessarily represent the views of the Federal Reserve Bank of Atlanta, the Federal Reserve System, or the Bank of Canada. Some data described in this presentation relies on data from surveys administered by the Understanding America Study, which is maintained by the Center for Economic and Social Research at the University of Southern California. The content of this presentation is solely the responsibility of the authors and does not necessarily represent the official views of USC or UAS. Claire.greene@atl.frb.org 2 Connection information • Webinar link • https://www.webcaster4.com/Webcast/Page/577/38127 • Choose to listen with your PC speakers • If you are having trouble hearing through your speakers • Call-in Number: 888-625-5230 • Participant Code: 4254 2100# • Ask a question • Click the Ask Question button in the webinar tool. • Email rapid@stls.frb.org 3 Three questions about consumers Are consumers shopping and paying in person? 2. What’s happening at the in-person point of sale? 3. Are consumers holding cash? 1. 3 4 Today’s speakers Kevin Foster Sr Business Survey Specialist Atlanta Fed Claire Greene Payments Risk Expert Atlanta Fed Shaun O'Brien Senior Policy Consultant Cash Product Office, San Francisco Fed Heng Chen Principal Researcher Currency Bank of Canada Gradon Nicholls Economist Currency Bank of Canada 5 Stepping up the pace of data collection 8/2019 10/2019 4/2020 4/2020 7/2020 8/2020 10/2020 11/2020 6 U.S. shutdown: Paying in person Paid in person at least once, "typical month" or "past 30 days" 96% 60% 34% October 2019 April 2020 August 2020 Sources: 2019 Survey of Consumer Payment Choice, 2020 Understanding Coronavirus in America 7 Most already shop, pay bills online US, 2019: 80% shop or pay bills online Source: 2019 Survey of Consumer Payment Choice 8 Cash use & acceptance still evolving April Summer More consumers used cash in summer Canada 36% 54% United States 20% 44% Varied experience of merchant acceptance Canada Cash refused: 12% Cash refused: 9% United States Cash refused: 7% Card preferred: 42% Cash use: U.S. cash is calculated as the share of consumers who paid in person and used cash. Canada cash use is share of consumers who reported making a cash payment in past week. Merchant acceptance: U.S. (April) is share of consumers who paid in person. U.S. (August) is share of people who paid in person who “always,” “most of the time,” or “sometimes” were asked to pay with a card. In 2018 in Canada, 96% of small & mid-sized merchants accepted cash. Sources: Understanding Coronavirus in America, Bank of Canada Cash Alternative Survey, Bank of Canada Cash Pulse Survey 9 In Canada, tap & mobile evolve, too Canada: tapping increasingly likely April Summer Consumers more likely to tap Debit 38% 54% Credit 48% 56% …& more likely to mobile pay Mobile phone 8% 12% Shares of consumers who used card tap and mobile pay in the past week. Pre-Covid-19, tapping rare in US 2019: • 3% of in-person credit payments were tapped • 0% of in-person debit were tapped • ~3% of in-person card payments used a mobile device Sources: 2019 Diary of Consumer Payment Choice, Bank of Canada Cash Alternative Survey, Bank of Canada Cash Pulse Survey 10 Elements of currency in circulation • Currency outside the U.S. (mostly $100s, more than half) • Currency inside the U.S. • Depository institution vault cash • Held by businesses and government • Held by consumers • For immediate spending • To store value, perhaps for savings or to use in an emergency 11 US & Canada: CIC surges Percentage change (value) from January 1 U.S. Canada U.S. Canada Sources: Bank of Canada, Federal Reserve Bank of St. Louis (FRED) 12 U.S. consumers held more cash October 2019 April/May 2020 43% 25% < $25 $25 -< $100 32% 46% 34% 20% $100+ < $25 $25 -< $100 $100+ Sources: 2019 DCPC, 2020 Understanding Coronavirus in America. 13 Why might consumers have more cash? Stuck at home Stimulus payments Emergency preparedness 14 Perceptions on cash avoidance April: Are you avoiding using cash because of the coronavirus? August: For the in-person payments that you have made in the past 30 days, have you avoided using cash because of the coronavirus? April: Do you currently have any plans to stop using cash in the future? Sources: Understanding Coronavirus in America, Bank of Canada Cash Alternative Survey 15 15 Lots of questions going forward Will shopping habits change permanently? Will cash lose its dominance in small-dollar-value transactions? Will Covid-19 jump-start the use of contactless pay? 16 References Reports Data and Information Akana, Tom. 2020. “CFI COVID-19 Survey of Consumers — Wave 3 RevealsImprovements, but Not for Everyone.” Federal Reserve Bank of Philadelphia Consumer Finance Institute Special Report Running Essential Errands, Centers for Disease Control. Federal Reserve Statistical Release, H.4.1, Factors Affecting Reserve Balances Auer, Raphael, Giulio Cornelli and Jon Frost. 2020. “Covid-19, cash, and the future of payments.” Bank for International Settlements BIS Bulletin No. 3. Federal Reserve statistical release H.3, Aggregate Reserves of Depository Institutions and the Monetary Base Brown, Martin, Nicole Hentschel, Hannes Mettler, and Helmut Stix. “Financial Innovation, Payment Choice and Cash Demand - Causal Evidence from the Staggered Introduction of Contactless Debit Cards.” 2020. FRED economic data, Federal Reserve Bank of St. Louis, currency in circulation Chen, Heng, Walter Engert, Kim P. Huynh, Gradon Nicholls, Mitchell Nicholson and Julia Zhu. 2020. “Cash and COVID-19: The impact of the pandemic on the demand for and use of cash.” Bank of Canada Staff Discussion Paper 2020-6. Understanding Coronavirus in America, Understanding America Study, University of Southern California Dornsife Center for Economic and Social Research. U.S. Coin Task Force, #getcoinmoving Foster, Kevin, and Claire Greene. Forthcoming. “Consumer behavior in a health crisis: What happened with cash?” Federal Reserve Bank of Atlanta Policy Hub. Take On Payments Commentary Foster, Kevin, Claire Greene, and Joanna Stavins. 2020. “The 2019 Survey of Consumer Payment Choice: Summary Results.” Federal Reserve Bank of Atlanta Research Data Report 20–3. Contactless Pay: A True Life Story, 8/10/2020 Greene, Claire, and Joanna Stavins. 2020. “The 2019 Diary of Consumer Payment Choice.” Federal Reserve Bank of Atlanta Research Data Report 20-4. Judson, Ruth. 2017. “The Death of Cash? Not So Fast: Demand for U.S. Currency at Home and Abroad, 1990-2016,” International Cash Conference 2017 - War on Cash: Is there a Future for Cash? 25 - 27 April 2017, Island of Mainau, Germany, Deutsche Bundesbank, Frankfurt a. M. Judson, Ruth. 2012. “Crisis and Calm: Demand for U.S. Currency at Home and Abroad from the Fall of the Berlin Wall to 2011.” International Finance Discussion Paper 1058. Board of Governors of the Federal Reserve System (November 2012). Kim, Laura, Raynil Kumar, and Shaun O’Brien. 2020. “2020 Findings from the Diary of Consumer Payment Choice.” Federal Reserve Bank of San Francisco Cash FedNotes. Kim, Laura, Raynil Kumar, and Shaun O’Brien. 2020. “Consumer Payments & the COVID-19 Pandemic: A supplement to the 2020 Findings from the Diary of Consumer Payment Choice.” Federal Reserve Bank of San Francisco Cash FedNotes. Could COVID-19 Help Narrow the Digital Divide? 7/6/2020 Are Contactless Cards Having their Moment? 6/8/2020 Some Seek Peace of Mind with Contactless, 5/26/2020 . 17 Take On Payments blog: Every Monday Fed Consumer Surveys • Survey of Consumer Payment Choice • Diary of Consumer Payment Choice • Survey of Consumer Finances • Survey of Household Economics and • This week: What Might Stormy Weather Mean for Banking Status? • October 26: Will the Pandemic Change B2B Check Usage? • September 8: New Payments Chassis Could Undergird Consumer-Friendly Vehicles Decisionmaking • Survey of Consumer Expectations • Consumers & Mobile Financial Services • Federal Reserve Payments Study