Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.
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November 14, 2022
When Speed and Acceptance Collide
Sometimes a person gets cornered into writing a paper check. Today, that person is me.
My final payment for a vacation rental is due this coming Friday. The rental starts in five days, on Saturday. But since the payee is a person, my online banking bill pay won't get the check there until the following Monday: three days late and two days after my check-in.
I'm cornered because two circumstances are colliding. (1) I absolutely, positively have to get the payment there by Friday. (2) My longtime landlord doesn't accept payment via p2p apps or cards. My preference for speed is in conflict with my landlord's preference for paper. And in a two-sided market, like payments, each side has to agree on how to conduct a transaction.
These circumstances call for 18th century technology: it's time to write a paper check. Cue quill pen and ink bottle, cue envelope, cue sleeve protectors, cue stamp.
My initial choice of online banking bill pay is what you would expect given new data from the 2021 Survey and Diary of Consumer Payment Choice, released in mid October. These data show that while the prevalence of checks has declined, they are still used.
On the "decline" side:
- The shares of consumers who prefer to use checks to pay bills dropped from 17 percent in 2016 to 8 percent in 2021.
- In 2020, checks were 19 percent of bill payments by number and 23 percent by value. This dropped to 12 percent by number and 12 percent by value in 2021.
- In the past 30 days ending in October 2021, more consumers used online banking bill pay (51 percent) than used a paper check (46 percent).
On the "still used" side:
- The average dollar value of check payments per consumer in October 2021 was $550.
- The average consumer wrote about two checks in October 2021.
- The share of consumer with paper checks on hand—three quarters of all consumers—has remained constant since 2019.
In combination, these data say that, sometimes when you're cornered, nothing says speed and acceptance like a paper check.
So while I go off on vacation in my paid-off rental, you can investigate the adoption and use of other payment instruments, as well as consumer ratings and preferences, at the data release of the Survey and Diary of Consumer Payment Choice.
October 31, 2022
Consumers' Remote Purchases of Food Level Off in 2021New data from the Survey and Diary of Consumer Payment Choice (SDCPC), released by the Atlanta Fed last week, give some clues to questions many of us are asking these days: Will the changes we've seen during COVID stick? Will we go back to our old ways? Will change accelerate?
Let's look at these questions through the lens of something we all do: eat. Carnivore and vegan, we gobble burgers. Lactose-tolerant and not, we slurp beverages. We shop in person and online, we order in, we eat out.
You and I—and US consumers generally—make many purchases of food to eat at home and away. Together, purchases of groceries, meals at sit-down restaurants and bars, and fast food accounted for four in 10 payments made by US consumers in October 2021, according to the SDCPC.
In a recent paper, Fed researchers Ruth Cohen, Oz Shy, and Joanna Stavins looked at payment instrument choice for these food purveyors, among other merchants, and found that the shift to remote payments during the COVID-19 pandemic was a driver of the decline in the use of cash in 2020. Their analysis, extended in the chart by Ruth Cohen to include the new 2021 data, found a jump in remote payments for all categories of food purchases during the pandemic year 2020.
The chart shows that the shares of remote payments in all three food categories are slightly down from 2020, but still well above their 2019 shares. Remote purchases remain a small share of all food purchases—less than 15 percent by number for each category—and the 2021 shares are similar to those seen in 2020.
So, no big jump from 2020, but no retreat either. In 2020, we all changed a lot. Now, we're consolidating and, as I wrote about data from September 2020, our collective reaction to the COVID-19 threat appears to be easing, along with some of the dramatic change from 2019 to 2020.
January 31, 2022
Quarterly Payments Data for 2020 Reflect Pandemic's Early Impact
Cast your mind back to spring 2020, the early months of the COVID-19 pandemic. With my apologies for the bad flashback, did you change how and where you shopped that spring? Maybe you ordered groceries online for the first time. Maybe you decided to skip browsing at your favorite clothing store. Maybe you exchanged eating out for ordering in.
You can see glimmers of your behavior—and that of consumers and businesses here in the United States—by looking at fluctuations in the mix of credit and debit card payments made remotely and in person in spring 2020.
Perhaps you remember making fewer in-person payments in spring 2020 because you were reluctant to be out and about, you worked at home, or businesses were closed. The Federal Reserve Payments Study (FRPS) recently reported that the number of in-person card payments dropped 19 percent from the first quarter of 2020 to the second.
Perhaps you moved some shopping online. The number of remote payments (including purchases and bills) was up 18 percent from Q1 to Q2 2020.
You can see the combined effect of these changes in the chart below. As a percentage of general-purpose card payments by number, in-person payments dropped from more than 68 percent in the first quarter to less than 60 percent in Q2 (shown by the red line in the chart below).
In-person payments as a share of all card payments recovered somewhat in later quarters to total 64 percent of all general-purpose card payments for the year 2020 (the blue line in the chart), a substantial drop from 72 percent in 2019.
The December report, Developments in Noncash Payments for 2019 and 2020: Findings from the Federal Reserve Payments Study, also contains quarterly data for depository institution accounts with digital wallet activity and with P2P activity using bank-sponsored apps.
January 17, 2022
Federal Reserve Payments Study Finds Effects of the Pandemic in US PaymentsIt's the week before the New Year, and we promised not to post this week. But I can't resist letting you know that a new report from the Federal Reserve Payments Study reports quarterly data related to the effects of the COVID-19 pandemic on US payments. This is interesting and important news, so I'm breaking the holiday hiatus.
Developments in Noncash Payments for 2019 and 2020: Findings from the Federal Reserve Payments Study, on the Federal Reserve's website, includes new information about core noncash payments and some evolving areas of payments:
- While data from 2019 largely show a continuation of past payment trends, with card and ACH both gaining share at the expense of check, 2020 data show that payment behavior changed sharply with the COVID-19 pandemic, with ACH gaining substantially as a share of noncash payments by both number and value.
- The share estimates combined with other information imply that ACH was the only one of the three core payment systems to grow by number in 2020.
- The total number of card payments declined in 2020, driven by a marked decline of in-person card payments. This was the first annual decline in the number of card payments recorded by the payments study.
- As in-person card payments dropped in spring 2020, remote card payments took up much of the slack. Later in the year, in-person card payments recovered somewhat.
- The pandemic may have helped spur growth of innovative payment methods, such as in-person contactless card, digital wallet, and person-to-person (P2P) payments.
- First-time use of bank-sponsored P2P payments spiked in the second quarter of 2020, a time of business closures and stay-at-home orders.- First-time use of digital wallets was highest in the third quarter, when some restrictions on in-person shopping were lifted. When used with a mobile device, a digital wallet provides a low-touch option for in-person card payments.
The report covers card (credit, non-prepaid debit, and prepaid debit), ACH, and check payments.
Go to the Federal Reserve's website to see other findings.
Happy new year! We look forward to continuing the payments conversation with you in January 2022!
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