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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June 1, 2021
The Generational Divide in Online Shopping during the COVID Pandemic
Like me, you probably have seen many headlines citing the impact of the COVID-19 pandemic on people in various demographic segments. Take, for example, age:
- "COVID-19 hurts working mothers"
- "Millenials slammed by second financial crisis"
- "COVID pushes out women and boomers"
- "Pandemic accelerates retirements"
As you can see from these headlines, no generation is unscathed.
How did people of different ages behave during COVID? Preliminary data from the 2020 Survey of Consumer Payment Choice appear to show that in 2020, millennials increased their uptake of new payments habits while boomers were slower to do so.
- Millennials increased their share of online purchases as a percentage of all purchases by a greater margin than boomers. Boomers’ share of purchases online went from 4 percent in 2019 to 6 percent in 2020. For millennials, online purchases jumped to 21 percent from 13 percent.
- Millennials continued to expand their enthusiastic reception of payment apps, including Venmo and Zelle.
Of course, many factors, not just COVID, are in play here. These could be a few:
- Millennials are moving into their prime earning years. For example, they became more likely to have a credit card in 2020. Two-thirds of millennials had a credit card in 2019, and almost 8 in 10 did in 2020.
- Boomers may be stuck in their habits. Payments choice, like many other consumer behaviors, is a habit and generally slow to change.
You can examine differences in consumer behavior by age using the interactive charts for the 2020 Survey of Consumer Payment Choice at atlantafed.org.
December 7, 2020
2020: The Year in Payments
Each year, the Risk Forum produces a year-in-review webinar. Every Risk Forum member helps plan the webinar, bringing together everyone's unique expertise and perspectives. During the year, each of us engages with a different area of the payments industry and initiatives, which leads to good-natured debate when it comes time at year's end to rank important payment topics. (If you are an avid follower of our blog, you might be able to guess who is pulling for which topics.) This year was a little different, though. We could not think about payments without also considering the heaviness and impact of the COVID-19 pandemic.
Our 2020 webinar will dig into key payment issues that are responses to the pandemic, or opportunities or challenges resulting from the pandemic. The goal is to share our analysis of the data collected over the past year, parse out trends that may have started during the pandemic but might be here to stay, and engage with our audience on where focus should be as we prepare to turn the page on this year and start a welcomed new year.
We will first answer this question: How have businesses' and consumers' payments behaviors adapted over the course of the year? There have been plenty of headlines covering retail trends both in-person and online or e-commerce. The Risk Forum will share details and data about retail payment trends while unpacking the nuances of the underlying technologies that facilitate retail payments. Also in this category are person-to-person and business-to-business payment trends, which we'll highlight, too.
New to the year-end webinar agenda is a focus on cash and coin. We'll share data on consumer cash usage and holdings along with unintended consequences, such as how currency demands have affected ATM operations. Another aspect of currency is how demand for cash this year has caused a coin supply distribution issue, sometimes incorrectly referred to as a coin shortage. The Forum will address the myths about the coin supply distribution issue and share insights from the work by the U.S. Coin Task Force.
These conversations about retail trends and currency demand are followed by another critical discussion, this one about financial inclusion opportunities that have been accelerated by the pandemic. The Atlanta Fed is working to emphasize how digital payment innovations can affect cash-based and vulnerable populations. We will highlight how recent events such as the distribution issues related to stimulus money and general financial support among family and friends have brought additional attention to financial inclusion. We will also share our research on this topic and talk about what steps we are taking toward creating solutions.
Not new to the agenda, unfortunately, will be coverage of fraud challenges. This year, we'll talk about scams that are capitalizing on pandemic responses. There have been several big fraud trends, relating to Paycheck Protection Program loans and Economic Impact Disaster Loans, unemployment benefits, fundraisers for fake charities, and PPE supplies (counterfeit). Rest assured: we will also highlight advancements in fraud defense tools, especially in ecommerce.
Please join us for the 2020 Year-in-Review webinar, our last Talk About Payments webinar for the year. This session will take place on December 17 from 1 to 2 p.m. (ET). To participate in the webinar, you must register in advance (there is no charge).
October 26, 2020
Will the Pandemic Change B2B Check Usage?
When I was in college, my first on-campus job was as an assistant in the university's accounting department. One of my responsibilities was to manually collate checks with their associated invoices, stuff them into envelopes, and drop them off in the outgoing mail bin before the 5 p.m. pickup. The entire process was so tedious and time-consuming that I couldn't help but wonder why a technology-focused school was still using outdated accounting systems and making payments using paper checks.
Well, as it turns out, checks are still the go-to form of payment for many businesses, particularly when paying other businesses. The 2019 Electronic Payments Survey by the Association for Financial Professionals found that checks, at 42 percent, were the most popular payment method for business-to-business (B2B) transactions In addition, the Atlanta Fed's latest Check Sample Survey (CSS) , which examined check usage by U.S. consumers and businesses in 2018, showed that the majority of B2B payments were bill payments by both number and value.
While digital payments are rapidly growing in popularity with consumers, the rate of adoption among businesses (specifically for B2B payments) appears slower, primarily because companies are deterred by the complex restructuring involved with digitizing their accounts payable (AP) systems. While it may not make sense for every business to adopt digital AP platforms, there are some benefits—it's less labor-intensive and, even though costs to convert to digital could be substantial, the platforms are faster. Some major global card networks have rolled out automated AP solutions, streamlining the entire B2B bill payment process. The Fed, in collaboration with other stakeholders, is currently working to address issues and barriers that make it challenging for businesses to adopt electronic payments.
Getting rid of paper checks certainly does not mean that B2B check fraud will be totally eliminated, but it is an important first step. According to the 2018 CSS, about 56 percent of the value of fraudulent checks was from B2B bill payments; by number, 14 percent was B2B bill payments. Not only do businesses have an increased need for secure, digital accessibility because of the pandemic, but also digital AP platforms could reduce health risks since employees no longer have to be physically present in the office to process and mail checks.
Although innovating for B2B payment processing began long before the onset of the COVID-19 crisis, perhaps the pandemic will serve as the catalyst that transforms the way businesses transact with other businesses at a much faster rate. It will be interesting to see what the future holds for B2B check usage as some businesses feel pressured by the public health emergency to adopt digital accounts payable systems. Are the days of stuffing envelopes finally coming to an end?
August 3, 2020
A Checkup on Checks: New Data on Business and Consumer Use
When did you last go to the dentist? OK, maybe too personal. How about this: when and why did you last write a check? For me, it was in December, for my annual purchase of Tag-a-Longs from my niece's Girl Scout troop. My check use is infrequent, but sometimes a check is still my go-to payment instrument. Even though the Federal Reserve Payments Study has found that the number of check payments in the United States declined from 41.9 billion in 2000 to 14.5 billion in 2018, U.S. businesses and consumers—like me—continue to use checks for all kinds of reasons, according to the 2018 Check Sample Survey (CSS) report, just published by the Atlanta Fed. The CSS reports check use by businesses and consumers based on a sample of checks cleared by the Federal Reserve in 2018.
Previous iterations of the CSS, which has been conducted since 2001, the 2018 survey estimated percentage shares of checks paid both by purpose (bill, POS, income, casual, and indeterminate) and by payer and payee (business and consumer). In 2018, for the first time, the report includes data about checks returned, allowing for detailed analysis of returns by reason code, including possible fraud. Checks returned are items that the paying depository institution has chosen not to honor and which the Federal Reserve subsequently returns to the depositing institution.
Among the findings:
- Just over half of checks are written by consumers.
- Businesses are the recipients of two-thirds of checks.
- The median value of a check written by a consumer is $116; by a business, $357.
- Checks written by businesses made up three-fourths of total check value.
- Checks returned for insufficient funds, which also include uncollected funds holds (funds on deposit but not yet available for withdrawal), were two-thirds of return items by number and half of return items by value.
Want to know more? Join us on Thursday, August 27, from 2 to 3 p.m. (ET), when I and my Retail Payments Risk Forum colleagues delve into the CSS findings in greater detail on our Talk About Payments webinar. You must register in advance to participate. Once you've registered, we'll send you a confirmation email with the access information. (There is no fee for the webinar.)
And before that next dentist visit, why don't you "do-si-do" on over to the Atlanta Fed website and see the report for yourself. You can download the report and Excel data tables and explore, drill down, and be part of the August 27 webinar discussion. Hope to see you there!