Consumer Payment Trends in the U.S.
Businesses routinely seek to appeal to consumers by understanding which goods or services they want to buy. But understanding how shoppers prefer to buy—that is, which forms of payments they favor, and why—is also critically important. Marketers, retailers, card associations and other product and service providers hope to make transactions easy and convenient for consumers, but they must also balance these requirements against their own needs. Meanwhile, in the post-recession U.S. marketplace the world of payments keeps evolving as consumers back away from credit cards, debit cards move toward saturation, online payment options proliferate, and contactless payments and mobile payments move closer on the horizon.
This all-new report from Packaged Facts examines consumer payment forms of all kinds, including credit cards, debit cards, gift/prepaid cards, cash, checks, online payment and emerging forms, with a focus on how consumer preferences have changed during the past five years and vis-à-vis the economic downturn and recovery.
It includes:
Myriad data sources include primary data compiled by Experian Simmons and cross-tabulated by Packaged Facts to create customized profiles of those consumers shaping the U.S. payments industry now and into the future.
This all-new report from Packaged Facts examines consumer payment forms of all kinds, including credit cards, debit cards, gift/prepaid cards, cash, checks, online payment and emerging forms, with a focus on how consumer preferences have changed during the past five years and vis-à-vis the economic downturn and recovery.
It includes:
- Analysis of how Americans’ financial outlook influences their spending and payment preferences.
- Demographic and psychographic profiling by payment form and consumer age, gender, race, geographic region, income, educational level, etc.
- Focus chapter on cash, whose straightforwardness and immediacy makes it the payment choice of more than half of U.S. adults.
- Focus chapter on checks, which despite declining usage remain popular for bill paying and are getting new legs via “digital reinvention.”
- Focus chapter on credit cards, which have reached saturation and face other challenges including more restrictive legislation and declining usage among consumers looking to reduce their debt.
- Focus chapter on debit cards, which continue to win followers but whose rise may be diverted by laws restricting overdraft fees.
- Coverage of gift cards and other prepaid debit cards, which are creating a fast-growing “second-tier” banking system for those without access to traditional banks.
- Focus chapter on new payment methods, including contactless, cell phone and Internet-based, all of which are jockeying for position in the next wave of payment forms.
Myriad data sources include primary data compiled by Experian Simmons and cross-tabulated by Packaged Facts to create customized profiles of those consumers shaping the U.S. payments industry now and into the future.
CHAPTER 1: EXECUTIVE SUMMARY
CHAPTER 2: MARKET OVERVIEW
Introduction
Scope of Report
Introduction
Methodology
Payment Trends
Check Remains Most Popular Form of Bill Payment
Figure: Payment Preferences in the U.S., 2009 (percent of U.S. adults)
Figure: Mode of Bill Payment, 2009 (percent of U.S. adults)
Debit Cards Lead in Non-Cash Transactions
Figure: Percentage of U.S. Non-Cash Payment Transactions by Type, 2009
Hitachi Consulting Study Places Electronic Payment Share at 63%
Government Study Confirms Market Directions
Figure: Percentage Share of Noncash Payments by Type, 2003-2006
Cash: Still Preferred by Over Half of Adults Making Purchases
Figure: Percentage of U.S. Adults Who Agree with the Statement “I Often Prefer to Pay Cash for the Things I Buy,” 2004-2009
Checks: Also Still in Use by Over Half of Americans
Figure: Percentage of U.S. Adults Who Have a Checking (Interest or Non-Interest) or Check Guarantee Card, 2004-2009 (percent)
Credit Cards: Over Half of Americans Are Regular Users
Figure: Credit Card Ownership and Usage by Frequency, 2004-2009
Debit Cards: Popularity Still Rising, But at Slower Rate
Figure: Debit Card Ownership and Usage, 2004-2009
Gift Cards, Prepaid Debit Cards, and Money Orders
Figure: Percentage of Debit Card Users: Banked vs. Unbanked, 2009
Figure: Percentage of U.S. Adults Who Have Sent Money Within the U.S. in the Last 12 Months, 2004-2009
Online Payments
Figure: Percentage of U.S. Adults Who Used Online Banking in Last 30 Days, 2004-2009
Consumer Spending Attitudes and Economic Outlook
Economic Downturn Dampens Americans’ Sense of Financial Security
Figure: Percentage of U.S. Adults Who Agree or Disagree with the Statement, I Feel Secure Financially,” 2004-2009
Figure: Percentage of U.S. Adults Who Agree with the Statement, “I Don’t Like the Idea of Being in Debt,” 2004-2009
Attitudes Toward Economy and Individual Financial Situation
Figure: Expected Forms of Consumer Payment During Holiday Season, 2009 (percent)
Financial Situation Sentiments by Demographics
Figure: Percentage of U.S. Adults Who Feel Better or Worse Off Financially Compared with 12 Months Ago, 2009
Age
Race
Income Levels
Education
Geographic Region
Marital Status and Children in Household
Impulse Shoppers and Informed Consumers
Consumer Financial Outlook Impact on Payment Preferences
Financially Secure Big on Credit, Checks
Figure: Payment Preferences Among the Financially Secure, 2009 (index)
Financially Insecure Lean Toward Money Orders, Debit
Figure: Payment Preferences Among the Financially Insecure, 2009 (index)
Responsible Spenders
Figure: Payment Preferences Among Responsible Spenders, 2009 (index)
Poor Savers and Careless Spenders
Figure: Payment Preferences Among Careless Spenders, 2009 (index)
Confident Consumers
Figure: Payment Forms by Level of Consumer Confidence: Low vs. High, 2009 (index)
Payment Preferences by Demographics
Age
Figure: Likelihood of Preferring Payment Forms by Type and Age Group, 2009
Young Adults and Teens Picking Up Plastic
Gender
Race
Figure: Likelihood of Preferring Payment Forms by Type and Race/Ethnicity, 2009
Geography
Education
Figure: Likelihood of Preferring Payment Forms by Type and Level of Educational Attainment, 2009
Income
Figure: Likelihood of Preferring Payment Forms by Type and Household Annual Income, 2009
CHAPTER 3: CASH
Introduction
Cash Is Elemental
Almost $800 Billion of U.S. Cash in Circulation
Older and Less Wealthy Americans Prefer Cash
Figure: Cash Usage by Demographic, 2009 (index)
Cash Preferred by Both Financially Secure and Insecure
Figure: Cash Usage by Financial Attitudes, 2009 (index)
Cash’s Popularity Difficult to Gauge
ATM Transactions Declining
Figure: Monthly Number of ATM Transactions per ATM in the U.S., 1996-2008
Figure: Total Number of U.S. ATM Transactions, 1996-2008 (billion)
Figure: Number of ATM Machines in the U.S., 1996-2008
Blame it on Debit Cards
Traveling Away From Cash
“Cash Only” Signs and Cash Discounts
A Second Coming of Cash
Turning to Cash in Hard Times
Calls to Redesign the Dollar
CHAPTER 4: CHECKS
Introduction
Paper Checks Holding Out in Digital Age
Figure: Number and Value of Checks Collected by the Reserve Banks, 1920-2003
The Fed’s Role in Check Processing
Figure: Number of Checks Paid in the United States, 2001-2006
Electronic Checking Through ACH
Figure: Distribution of Number of Noncash Payments, 2003-2006 (percent)
The Demographics of Check Writers
Figure: Check Usage by Demographic, 2009 (index)
Responsible Spenders Use Checks
Figure: Check Usage by Financial Attitudes, 2009 (index)
Rare in the Retail Environment
Figure: Checks’ Share of Consumer Holiday Payment Methods, 2007-2009
Digitalizing Deposits
Overdrawn Checking Accounts a Cash Cow for Banks
The Unbanked Rely on Check Cashing Outlets
CHAPTER 5: CREDIT CARDS
Introduction
The Rise of the Credit Card
Figure: Share of U.S. General Purpose Debit, Credit & Charge Card Purchase Volume, 2008 (percent)
Figure: Share of U.S. General Purpose Credit & Charge Card Purchase Volume, 2008 (percent)
Plastic Is Prevalent
Credit Cards for Everyone
Credit Cards: Key Users
One Quarter of Americans Use Credit Cards for Bill Paying
Figure: Credit Card Usage by Demographic, 2009 (index)
Cardholders Consider Themselves Financially Astute
Figure: Credit Card Usage by Financial Attitudes, 2009 (index)
Carrying a Balance
Preferred for Pricey Items
Figure: Preferred Payment (Credit or Debit) for Spending Categories, 2009 (index)
Figure: Economic Outlook Among Credit Card Users, 2009 (index) Reward Cards Approaching 100%
Figure: U.S. Rewards-Based Credit Cards versus General Purpose Credit Cards Without Rewards, 2003 vs. 2007 vs. 2011
Rewards Less Rewarding for Both Issuers and Consumers
The Shift Away from Credit
Figure: Distribution of the Number of Noncash Payments, 2003-2006 (percent)
Figure: Revolving Consumer Debt, 2004-2009
Behind the Disenchantment with Credit
“Evil, Thieving Bastards”
Punctured Profitability
Figure: Return on Assets, Large U.S. Credit Card Banks, 1986-2008 (percent)
New Legislation Will Restrict Credit Card Industry
Table: Key Provision of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009
Income from Interchange
Table: Changes in Visa and MasterCard Domestic Credit Card Interchange Fee Rates, Numbers, and Average Rates, 1991-2009
Interchange Under Attack
Security a Concern
Looking Ahead
End of Excess
Returning to Charge Roots
Shifting Fees, Diluted Rewards
CHAPTER 6: DEBIT CARDS, GIFT CARDS, AND PREPAID DEBIT
Introduction
Debit Cards Push Out in Front
Figure: Distribution of Number of Noncash Payments, 2003-2006 (percent)
Recession Driving Even More to Debit
Visa Dominates Debit
Debit Disadvantages for Consumers
Rise in Debit Card Ownership
Figure: Debit Card Ownership and Frequency of Usage, 2004-2009 (percent)
Debit Card Demographics
Figure: Debit Card Usage by Demographic, 2009 (index)
Heavy Debit Users Feel Financially Insecure
Figure: Debit Card Usage by Financial Attitudes, 2009 (index)
Rewards Programs Expected to Grow
The Tug of War Between PIN and Signature Debit
Consumers’ Stance on PIN and Signature Debit
Figure: Ranking of Payment Methods When Making a Purchase at a Grocery Store, 2008
Cascading Overdraft Fees
Table: Consumers Who Prefer That Their Debit Card Be Declined If Account Overdrawn: By Transaction Amount, 2008 (percent)
Clamping Down on Overdraft
Gift Cards
Growth of the Gift Card
Size of Gift Card Market
Gift Cards Have Fallen from Their Previous High
Figure: Holiday Demand for Gift Cards (percent)
Gift Card Drawbacks
Overspending—Or Not Spending at All
Prepaid Debit
Prepaid Lifts Off
The Plusses of Prepaid
Figure: Reasons Consumers Choose Prepaid Debit, 2009 (percent)
The Prepaid Population
Figure: Ownership and Awareness of Prepaid Cards Among Check Cashing Store Customers, 2009 (percent)
Funded by Fees
Secondary Banking System
Prepaid in the Public and Private Sectors
Looking Ahead
Debit on a Roll
Prepaid Well-Positioned
Decoupled Debit Looking for Traction
CHAPTER 7: ONLINE, ALTERNATIVE, AND EMERGING PAYMENTS
Introduction
Online Bill Pay Catches on Quickly
Demographics of Online Bill Pay Users
Figure: Bill Pay Usage by Demographic, 2009 (index) Alternative Payments Butt Heads with Cards
Table: Consumer Payment Preferences, Internet Payment Vehicles, 2005 vs. 2008
PayPal
Google Checkout
Amazon Payments
Bill Me Later
eBillMe
Zong, Boku, and Kwedit
RevolutionCard
Contactless Cards and Mobile Payments
Payments Without Contact
Contactless Not Connecting
A Bridge to Mobile Payments
Security Worries
Growing Interest in Mobile Payments
Awaiting a Breakthrough
Mobility Versatility
Peer-to-Peer Payments Going After Cash
All Eyes on the iPhone
CHAPTER 2: MARKET OVERVIEW
Introduction
Scope of Report
Introduction
Methodology
Payment Trends
Check Remains Most Popular Form of Bill Payment
Figure: Payment Preferences in the U.S., 2009 (percent of U.S. adults)
Figure: Mode of Bill Payment, 2009 (percent of U.S. adults)
Debit Cards Lead in Non-Cash Transactions
Figure: Percentage of U.S. Non-Cash Payment Transactions by Type, 2009
Hitachi Consulting Study Places Electronic Payment Share at 63%
Government Study Confirms Market Directions
Figure: Percentage Share of Noncash Payments by Type, 2003-2006
Cash: Still Preferred by Over Half of Adults Making Purchases
Figure: Percentage of U.S. Adults Who Agree with the Statement “I Often Prefer to Pay Cash for the Things I Buy,” 2004-2009
Checks: Also Still in Use by Over Half of Americans
Figure: Percentage of U.S. Adults Who Have a Checking (Interest or Non-Interest) or Check Guarantee Card, 2004-2009 (percent)
Credit Cards: Over Half of Americans Are Regular Users
Figure: Credit Card Ownership and Usage by Frequency, 2004-2009
Debit Cards: Popularity Still Rising, But at Slower Rate
Figure: Debit Card Ownership and Usage, 2004-2009
Gift Cards, Prepaid Debit Cards, and Money Orders
Figure: Percentage of Debit Card Users: Banked vs. Unbanked, 2009
Figure: Percentage of U.S. Adults Who Have Sent Money Within the U.S. in the Last 12 Months, 2004-2009
Online Payments
Figure: Percentage of U.S. Adults Who Used Online Banking in Last 30 Days, 2004-2009
Consumer Spending Attitudes and Economic Outlook
Economic Downturn Dampens Americans’ Sense of Financial Security
Figure: Percentage of U.S. Adults Who Agree or Disagree with the Statement, I Feel Secure Financially,” 2004-2009
Figure: Percentage of U.S. Adults Who Agree with the Statement, “I Don’t Like the Idea of Being in Debt,” 2004-2009
Attitudes Toward Economy and Individual Financial Situation
Figure: Expected Forms of Consumer Payment During Holiday Season, 2009 (percent)
Financial Situation Sentiments by Demographics
Figure: Percentage of U.S. Adults Who Feel Better or Worse Off Financially Compared with 12 Months Ago, 2009
Age
Race
Income Levels
Education
Geographic Region
Marital Status and Children in Household
Impulse Shoppers and Informed Consumers
Consumer Financial Outlook Impact on Payment Preferences
Financially Secure Big on Credit, Checks
Figure: Payment Preferences Among the Financially Secure, 2009 (index)
Financially Insecure Lean Toward Money Orders, Debit
Figure: Payment Preferences Among the Financially Insecure, 2009 (index)
Responsible Spenders
Figure: Payment Preferences Among Responsible Spenders, 2009 (index)
Poor Savers and Careless Spenders
Figure: Payment Preferences Among Careless Spenders, 2009 (index)
Confident Consumers
Figure: Payment Forms by Level of Consumer Confidence: Low vs. High, 2009 (index)
Payment Preferences by Demographics
Age
Figure: Likelihood of Preferring Payment Forms by Type and Age Group, 2009
Young Adults and Teens Picking Up Plastic
Gender
Race
Figure: Likelihood of Preferring Payment Forms by Type and Race/Ethnicity, 2009
Geography
Education
Figure: Likelihood of Preferring Payment Forms by Type and Level of Educational Attainment, 2009
Income
Figure: Likelihood of Preferring Payment Forms by Type and Household Annual Income, 2009
CHAPTER 3: CASH
Introduction
Cash Is Elemental
Almost $800 Billion of U.S. Cash in Circulation
Older and Less Wealthy Americans Prefer Cash
Figure: Cash Usage by Demographic, 2009 (index)
Cash Preferred by Both Financially Secure and Insecure
Figure: Cash Usage by Financial Attitudes, 2009 (index)
Cash’s Popularity Difficult to Gauge
ATM Transactions Declining
Figure: Monthly Number of ATM Transactions per ATM in the U.S., 1996-2008
Figure: Total Number of U.S. ATM Transactions, 1996-2008 (billion)
Figure: Number of ATM Machines in the U.S., 1996-2008
Blame it on Debit Cards
Traveling Away From Cash
“Cash Only” Signs and Cash Discounts
A Second Coming of Cash
Turning to Cash in Hard Times
Calls to Redesign the Dollar
CHAPTER 4: CHECKS
Introduction
Paper Checks Holding Out in Digital Age
Figure: Number and Value of Checks Collected by the Reserve Banks, 1920-2003
The Fed’s Role in Check Processing
Figure: Number of Checks Paid in the United States, 2001-2006
Electronic Checking Through ACH
Figure: Distribution of Number of Noncash Payments, 2003-2006 (percent)
The Demographics of Check Writers
Figure: Check Usage by Demographic, 2009 (index)
Responsible Spenders Use Checks
Figure: Check Usage by Financial Attitudes, 2009 (index)
Rare in the Retail Environment
Figure: Checks’ Share of Consumer Holiday Payment Methods, 2007-2009
Digitalizing Deposits
Overdrawn Checking Accounts a Cash Cow for Banks
The Unbanked Rely on Check Cashing Outlets
CHAPTER 5: CREDIT CARDS
Introduction
The Rise of the Credit Card
Figure: Share of U.S. General Purpose Debit, Credit & Charge Card Purchase Volume, 2008 (percent)
Figure: Share of U.S. General Purpose Credit & Charge Card Purchase Volume, 2008 (percent)
Plastic Is Prevalent
Credit Cards for Everyone
Credit Cards: Key Users
One Quarter of Americans Use Credit Cards for Bill Paying
Figure: Credit Card Usage by Demographic, 2009 (index)
Cardholders Consider Themselves Financially Astute
Figure: Credit Card Usage by Financial Attitudes, 2009 (index)
Carrying a Balance
Preferred for Pricey Items
Figure: Preferred Payment (Credit or Debit) for Spending Categories, 2009 (index)
Figure: Economic Outlook Among Credit Card Users, 2009 (index) Reward Cards Approaching 100%
Figure: U.S. Rewards-Based Credit Cards versus General Purpose Credit Cards Without Rewards, 2003 vs. 2007 vs. 2011
Rewards Less Rewarding for Both Issuers and Consumers
The Shift Away from Credit
Figure: Distribution of the Number of Noncash Payments, 2003-2006 (percent)
Figure: Revolving Consumer Debt, 2004-2009
Behind the Disenchantment with Credit
“Evil, Thieving Bastards”
Punctured Profitability
Figure: Return on Assets, Large U.S. Credit Card Banks, 1986-2008 (percent)
New Legislation Will Restrict Credit Card Industry
Table: Key Provision of the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009
Income from Interchange
Table: Changes in Visa and MasterCard Domestic Credit Card Interchange Fee Rates, Numbers, and Average Rates, 1991-2009
Interchange Under Attack
Security a Concern
Looking Ahead
End of Excess
Returning to Charge Roots
Shifting Fees, Diluted Rewards
CHAPTER 6: DEBIT CARDS, GIFT CARDS, AND PREPAID DEBIT
Introduction
Debit Cards Push Out in Front
Figure: Distribution of Number of Noncash Payments, 2003-2006 (percent)
Recession Driving Even More to Debit
Visa Dominates Debit
Debit Disadvantages for Consumers
Rise in Debit Card Ownership
Figure: Debit Card Ownership and Frequency of Usage, 2004-2009 (percent)
Debit Card Demographics
Figure: Debit Card Usage by Demographic, 2009 (index)
Heavy Debit Users Feel Financially Insecure
Figure: Debit Card Usage by Financial Attitudes, 2009 (index)
Rewards Programs Expected to Grow
The Tug of War Between PIN and Signature Debit
Consumers’ Stance on PIN and Signature Debit
Figure: Ranking of Payment Methods When Making a Purchase at a Grocery Store, 2008
Cascading Overdraft Fees
Table: Consumers Who Prefer That Their Debit Card Be Declined If Account Overdrawn: By Transaction Amount, 2008 (percent)
Clamping Down on Overdraft
Gift Cards
Growth of the Gift Card
Size of Gift Card Market
Gift Cards Have Fallen from Their Previous High
Figure: Holiday Demand for Gift Cards (percent)
Gift Card Drawbacks
Overspending—Or Not Spending at All
Prepaid Debit
Prepaid Lifts Off
The Plusses of Prepaid
Figure: Reasons Consumers Choose Prepaid Debit, 2009 (percent)
The Prepaid Population
Figure: Ownership and Awareness of Prepaid Cards Among Check Cashing Store Customers, 2009 (percent)
Funded by Fees
Secondary Banking System
Prepaid in the Public and Private Sectors
Looking Ahead
Debit on a Roll
Prepaid Well-Positioned
Decoupled Debit Looking for Traction
CHAPTER 7: ONLINE, ALTERNATIVE, AND EMERGING PAYMENTS
Introduction
Online Bill Pay Catches on Quickly
Demographics of Online Bill Pay Users
Figure: Bill Pay Usage by Demographic, 2009 (index) Alternative Payments Butt Heads with Cards
Table: Consumer Payment Preferences, Internet Payment Vehicles, 2005 vs. 2008
PayPal
Google Checkout
Amazon Payments
Bill Me Later
eBillMe
Zong, Boku, and Kwedit
RevolutionCard
Contactless Cards and Mobile Payments
Payments Without Contact
Contactless Not Connecting
A Bridge to Mobile Payments
Security Worries
Growing Interest in Mobile Payments
Awaiting a Breakthrough
Mobility Versatility
Peer-to-Peer Payments Going After Cash
All Eyes on the iPhone
