Federal Reserve Bank of Atlanta Talk About Payments Webinar

Eight Questions about Consumer Payments Behavior

What happened with consumer payments in the COVID year? Have consumers migrated to electronic P2P? Has the use of cash changed?

In this episode of our Talk About Payments webinar series on July 13, three payments experts explored these and other questions, using new data from the Survey and Diary of Consumer Payment Choice. Claire Greene, payments risk expert at the Atlanta Fed, lead the discussion with Joanna Stavins, senior economist and policy advisor at the Federal Reserve Bank of Boston, and Shaun O'Brien, lead data and policy analyst in the Cash Product Office at the San Francisco Fed.

Send questions about the webinar to David Lott at david.lott@atl.frb.org.

You may view previous Talk About Payments webinars.


Meagan Banta-Lewis: Hello, and welcome to the Federal Reserve Bank of Atlanta's Talk About Payments webinar. Today's topic: Eight Questions about Consumer Payments Behavior. I'm Meagan Banta-Lewis from the Center for Learning Innovation at the Federal Reserve Bank of St. Louis, and I'll be producing today's event, and before turning the call over to our presenters, I just want to walk through a few logistics.

This event is set up a little differently from previous TAP webinars. We're viewing our speakers' video today, which means that streaming both video and audio is the best option. We automatically sent all attendees to the stream upon entry, so for now you can sit back, relax, and enjoy the webinar.

If you have audio issues, you can still listen through your phone. The phone information is listed on the player page, but please know that because the event is streamed, if you listen through your phone, the audio might not sync with the presenters' video.

A couple more notes about the player page: we'd love to hear from you, so please send us your question using the "Ask Question" button. And if you would like a PDF version of today's presentation, you can access it using the "Materials" button on that player page.

Just a quick disclaimer, as I'm sure you guys are used to: the views expressed in this presentation are those of the presenters, and do not necessarily reflect the positions or policies of the Federal Reserve Bank of Atlanta or the Federal Reserve System.

And with that out of the way, it is now my pleasure to turn the call over to our first presenter, Claire Greene, to begin our program.

Claire Greene: Hello, everyone. We're here today to talk about eight questions related to purchases and P2P payments in the pandemic—so we've got a lot of ps to go over today. I'm joined today by Joanna Stavins from the Federal Reserve Bank of Boston and Shaun O'Brien from the Federal Reserve Bank of San Francisco. I'm a payments risk expert at the Federal Reserve Bank of Atlanta, in the Retail Payments Risk Forum.

And to get ourselves started, I'll just mention that Shaun and Joanna and I have worked on collecting survey data on consumer payments together for almost nine years, and Joanna and Shaun have worked in this area longer than I have. So we have a lot of history together, and I'm going to ask them both to introduce themselves. Joanna?

Joanna Stavins: Hello, everyone. I am Joanna Stavins and I'm an economist at the Boston Fed, working on payments, as Claire just mentioned.

Shaun O'Brien: And hello, everyone. My name is Shaun O'Brien. I'm a lead policy analyst for the Cash Product Office located in San Francisco, and, as Claire has mentioned, I, too, work with consumer surveys and in understanding consumer payments.

Greene: Before we get started, I'm going to do something with our panelists that survey researchers really should never do, which is to use ourselves for survey research. And my question for all of us is, "What has been your most notable change in behavior since the pandemic began?"

My response is that I have been less likely to tap to pay since March 2020 than previously—mostly because I've stopped riding public transit. And so that shows first of all that maybe my results are not going to match what you're going to see later, and also that I had an underlying behavior that caused this payment change.


Stavins: I had already stopped using cash before COVID, so that certainly didn't change. But one thing that did change is that I avoided shopping in person, so I would go to the supermarket once every week or two weeks. And so I had fewer transactions, but much larger amounts each time than previously.

Greene: And Shaun?

O'Brien: I have a very similar experience to Joanna. My wife and I would usually go grocery shopping two to three times a week, and we switched to trying to find windows for pickup at our local grocery store or windows in order to get a delivery for the groceries to be sent to our house. So we have had far fewer payments, and the payments that we have been making have been much, much larger.

Greene: So as we go through today's presentations, you can think either about our answers or your own and ask yourself the question, "Are we normal?" Meanwhile, Meagan has already pointed out that these remarks are our own and do not represent the views of the Federal Reserve Banks of Atlanta, Boston, or San Francisco, or the Federal Reserve System. And we also would encourage you to please jump in and ask questions as we go along, in the chat. And could I please have slide four now?

To get started, I'm just going to tell you a little bit about our data source, which is representative surveys of U.S. consumers age 18 and older: the Survey of Consumer Payment Choice and the Diary of Consumer Payment Choice. And these surveys are useful for policymakers, for innovators in the payments space, for financial educators—and also, as I think Shaun will tell us a little bit later, for the Federal Reserve's planning for its own business lines.

Basically, we're trying to learn about many aspects of consumer payment behavior. We ask consumers questions in three main areas. First, what they think about particular payment instruments: Are they convenient to use? Are they safe? Are they fast?

And when I say "payment instrument," I mean what I'll call the" traditional seven": so that's three paper payment instruments—cash, paper check, and money order; three kinds of cards—credit, debit, and prepaid; and two electronic ways to pay, what you experts participating today would call an ACH payment and what we, in our questionnaire speaking to consumers, call either a bank-account-number payment (where you put your routing number and account in at a website—say, your electric company) or using your bank's online banking bill pay. So that's what we mean when we say "payment instrument."

We also asked people whether they have a checking account or a savings account, and whether or not they have owned (or are set up to use) the seven payment instruments I just described. And then to ask people about use, we ask in two different ways. One thing we do is we ask people about their payment use for different types of transactions in what we'll call a typical month, and that would include bill payment transactions, purchases, and also P2P.

And then in the Diary of Consumer Payment Choice, we ask people very specifically about individual transactions that they conduct and record, pretty much in real time. And they tell us times of payees, the time of the day, if the transaction was in person or not, the dollar value for that transaction, if it was a person whether they used some sort of a device like a phone or laptop, et cetera.

So that's an overview of the data that's available in this survey. We do conduct this survey using a panel at the University of Southern California, and the advantage of a panel is that some of the same people take the survey from one year to the next. In the pandemic year 2020, 65 percent of the people who responded in October 2020 also responded in October 2019, and that puts the declaration of the national emergency (in March 2020) at just about the midpoint between these two surveys. It is notable that you should think of these surveys as a snapshot, however, not necessarily as a continuous depiction of everything that happened since the start of the pandemic.

And now I'm just going to ask Shaun if he could tell us a little bit about how the Cash Product Office uses this data.

O'Brien: Sure. Obviously, cash is one of those payment instruments that can't really be traced, so the ultimate end users of cash really are consumers—even though from the Cash Product Office's perspective, from the Federal Reserve's perspective, our customers are depository institutions. So we can understand what ordering and depositing behavior our own customers are conducting, but really it's the consumers' demand for cash—and how they're using cash—that we don't have insight into.

This annual data that we collect really helps us understand how consumers are using cash as a payment instrument, how cash use may be increasing or decreasing for different merchant types, and then really how consumers are using cash not just as a payment instrument—maybe as a backup instrument, or as a store of value. And how cash is being used differently by consumers really helps us understand the future investments that we want to make as a cash product office and help guide the 28 cash processing plants across the country.

So it's the importance of understanding consumers, and their use of cash and how they're using it, that to us is really quite vital.

Greene: And this is of course central to the Fed's mission of ensuring an adequate supply of reliable currency, both in the U.S. and internationally. So now could we go to slide five?

I did promise you eight questions, and this is the key data that we are going to be unpacking today using these questions. What this chart shows is the percentage shares of purchases and P2P payments consumers make, sorted by (from the top): cards, the blue; cash, the green (of course); and electronic and mobile, the red. And you can see here that from 2019 to 2020, the share of consumer purchases made using a card increased from 62.9 percent to 67.5 percent, and the share made using cash declined from 30.7 percent to 22.8 percent. And also, the share of using electronic payments increased.

So that change is 4.5 percentage points up for cards and 8 percentage points down for cash. I did point out, when I was introducing the data, that we also collect data on bills. And before we move specifically to purchases, you might like to know a little bit about what we've learned about bills (and also why we're not talking about bills today).

I'll ask Joanna to tell us a bit about that.

Stavins: Sure. The interesting thing—and maybe not surprising to most of you—is that most of the bills, unlike purchases, are not really discretionary. So, pandemic or no pandemic, most people typically have to pay their mortgage or rent and their utility bills, and so the number of bills in terms of the number of transactions, it doesn't really vary from prepandemic to the period during the pandemic. The dollar amounts don't necessarily change.

More importantly, the payment instruments, which is what we're focusing on in some of our research, didn't change as well, in large part because most bill payments do not require physical contact and so people did not necessarily need to, for safety reasons, avoid bill payments. So bill payment behavior did not significantly change from 2019 to 2020, and that's why we focus on purchases.

Greene: Thanks, Joanna. Now we're moving to slide six, which is our first polling question, where the three of us would like to know what you think about the data we've reported on the shares of purchases used by cards, cash and electronic payments.

So, would you like to take it away, Meagan?

Banta-Lewis: Absolutely. We've got this question going for you guys. We're asking, "Was this change in use of cash or cards about what you expected, less change than you expected, or more change than you expected?"

We're just going to give you guys a few moments to answer.

Greene: While we wait for the results to come in, I'll just tell you a little bit more about the way we describe purchases. As I mentioned, in the Diary of Consumer Payment Choice—where most of the results we're reporting today are from—we do ask people to tell us who they paid. So people might say they paid a grocery store, convenience store, pharmacy, gas station, they ate at restaurant, or they went to a store. They also tell us if they bought services. As well, they tell us if they spent money on household utilities, just for example, which we pretty automatically classify as a bill payment.

We do have some categories that are a little bit mixed with what people might be doing, and so there are follow-up questions where we'll say, "Is this payment a bill?" So, say you said you made a medical payment. Well, you could have gone to your local pharmacy and bought some aspirin or you could have paid a medical copay. You may think of one of those items as a purchase and the other as a bill.

So that's part of our classification system. There are a number of other follow-up questions we use for classifying. Anyone who has questions about that should get in touch.

Banta-Lewis: Great. So everyone should be able to see—the results should pop up shortly for you, but it looks like for about 74 percent, the change was about what they expected; 20 percent, less change than expected, and 6 percent, more change than expected. So the majority, about [what was expected].

Greene: Okay. So that's pretty interesting that perhaps your experience, or your research, reflects similar behaviors.

Jessica Washington: This is Jessica. I've been manning the Q & A section, and I have a question that I think you might want to address now: "How do you define electronic mobile? Is there a card payment behind the scenes on some?"

Greene: Yes, that is correct. We're first interested in those seven traditional payment instruments—paper, card, and electronic—and in the Diary, if people report that they made a mobile payment, they get a follow-up question that asks how that mobile payment was funded (for example, with a debit card, credit card, direct withdrawal from an account, et cetera). And that also is the case if people report, for example, that they made like some sort of an app—PayPal, Venmo—payment, that there would be that kind of a follow-up there also.

Now I am on slide seven, and this is our first question where we try to zoom in on what's going on in that changing mix of payment instruments for purchases. As you saw in the previous slide, about 68 percent of purchases were made with cards. And here what we're doing is zooming in to see which types of cards had the most change. At the top you can see in the blue line in 2020, about 33 percent of purchases were made with debit cards. The red line, about 32 percent of purchases were made with credit cards (a more significant of an increase since 2019). And then prepaid cards representing about 3 percent of these purchases.

Again, this is a snapshot at two points in time: October 2019 and October 2020. So, I'd like to ask Joanna what we know about the use of cards from other data sources, and also what she thinks about this result.

Stavins: The change in card use was very, very dramatic during COVID, but not necessarily corresponding to this slide because what happened is—I think it's not going to be a surprise to anyone—is that spending dropped dramatically at the beginning of COVID, including credit cards. Not only credit cards, but a lot of the types of transactions that are typically associated with credit cards, such as travel, airplane tickets, hotel—those essentially disappeared (and a lot of other services as well, like restaurant spending).

So I think credit card spending went down probably a lot faster than other types of payments, and some of it came back. During the summer of 2020, some of it came back, and more recently. But the level of card spending is still way below pre-COVID.

And interestingly, as you (I think) show on the slide, revolving has gone down a lot. People were spending less and borrowing less on credit cards, and a lot of people found themselves with additional liquidity—savings in their bank accounts, a lot of times enhanced by stimulus payments and some additional unemployment payments. And there was a survey by the New York Fed that showed that a large fraction of consumers used the additional liquidity to pay down their revolving debt. So the revolving debt and current spending on credit cards went down pretty dramatically early in COVID.

Greene: And I think there's also data or research saying that when people are revolving, they are a lot less likely to use their credit card—maybe more likely to use a debit card.

Stavins: Right. This is what we found in some of our research. Although that was done preCOVID, so I can't really say that that will hold up, but we certainly did find it in the past. People who are revolving on credit cards try to stay away from them on average and use their debit cards more often for day-to-day purchases.

Greene: Thanks. So now we're going to move on to question number two, which is, "Did the composition of purchases change from 2019 to 2020?" Because the characteristics of the transaction are certainly, as I'm sure you know from your own experience, very relevant for the payment instrument you choose to use—in particular, for the choice to use cash.

So, Shaun, you've reported some interesting findings about purchases by dollar value. Do you want to tell us about that?

O'Brien: Sure. Just looking at the chart that you have up on the screen now, you can see just the sharp drop that took place in 2020, really for small-value payments, which are, in this particular chart, defined as payments that are under $25. Traditionally, those are the in-person payments that you'd make at, say, a grocery store, convenience store, gas station. In a lot of instances, those were the types of payments where people would often reach for cash.

What we saw in 2020, and this relates back to just what Joanna was talking about, was we saw not only a change in how people were making payments—whether they were using credit cards, if they were using them differently and revolving, not revolving—and we see that translate also into the in-person, small0value payments as well.

And so as we think about what happened in 2020 with respect to payments, we saw a drop in payments, and a lot of that was driven by a decline in cash payments, and really most of that decline was in that small-value payments category that you're looking at here on slide eight.

Greene: And just to add, this relates back to what Shaun and Joanna said about their own shopping behavior during COVID, that people are maybe shopping less frequently and coming home with a bigger basket.

So now let's move to slide nine, please. And this is question number three, a question I'm sure many of you have been thinking about, which is, "What happened with the remote and in-person mix of payments?" And this gives you an overview. As you can see, what has happened is that purchases overall declined from 29 per month in 2019 to 26 in 2020. The total dollar value of purchases that consumers made in those two different months—the total dollar value increased in 2020, with the result that the average dollar value of a purchase increased 20 percent, from $51 to $61.

And then what you can see here on slide nine, in the red bar, is that the share of purchases that are remote increased from 9 percent of purchases to 20 percent in 2019, and also that the share of purchases increased in absolute numbers. So I'll ask Shaun: looking at the slope of this red line here—which is pretty notable, compared to some of our prior years—another important question for today is, "What do you think about that? Is this a COVID effect? Is this a long-term trend? Is it a mix of both? How do you try to separate that out?"

O'Brien: In general, the overall trend that we're seeing is a little bit of both. One of the interesting stats that we would always talk about prepandemic was, we hear a lot about the growth of online purchases (not-in-person payments). But really, most people still conduct most of their transactions in person. That trend had been decreasing over the years, so you can see that red line slowly trending up since 2016. But obviously the pandemic had a drastic impact just from the anecdotal stories that we were talking about before, from the data that we saw on the previous slide where small-value payments decreased. This really is just an indication that people were not just shopping less, but they were changing how they were shopping.

What this means going forward, we're not quite sure yet. Some of the information that we have points to the fact that this is likely to return to a more prepandemic level, but at the same time we've also seen historically that individuals' payment preferences and behaviors tend to be quite sticky. How sticky those preferences and habits are that developed during the pandemic, we don't yet know at this point.

But Joanna, I wasn't sure if there was additional commentary or something else that you would like to add to that.

Stavins: Yes. I was just going to add that even though the number of transactions in person might have declined somewhat you should also, I think, understand that when we asked people whether or not they shopped in person, the vast majority—way over 90 percent of people—had done some in-person transactions (though the number was I think slightly lower in 2020, there was no significant change).

So most people do fewer transactions in person, but they still venture out. And once we feel comfortable and we're all vaccinated, maybe they will return to normal. But as Shaun said, it remains to be seen which of those changes are going to stick.

Washington: And I had a question from the audience—actually, two questions—on this topic. "You mentioned that you do some interim research between the October fieldwork. Any major findings outside of what you've already discussed—any rebounding that you've seen with the in-store purchases?"

And this is a separate question, but related: "Do you expect cash to bounce back to the prepandemic levels?"

O'Brien: Claire, I can hop in and take that one. We did additional studies between the October 2019 Diary study and the October 2020 Diary study, and really these were just short surveys—anywhere from about 8 to 12 questions—that we had asked individuals who are part of the USC panel that we use for the Diary studies, just general payment behavior questions and cash holdings questions.

We would ask them, "How much cash are you holding in your pocket, purse or wallet? How much cash is stored elsewhere? Did you make an in-person payment in the last 30 days? Did you use cash for any of those in-person payments?" The types of questions that we were asking were slightly different than what we traditionally ask in our annual payments studies, and it was really to get an understanding of how things were changing in the moment. We didn't get transaction-level data that really allows us to compare the trends throughout the pandemic with the data that we get (the transaction-level data) from the Diaries.

But one of the main things, from the cash perspective that the CPO was really interested in, was we saw currency in circulation really increase throughout the pandemic—which, early on at least, was unexpected. And we've seen a corresponding increase in the amount of cash that people are reported holding in their house and their cars, and elsewhere that we don't consider "on person."

Claire, I wasn't sure if there's anything else that you wanted to add.

Greene: No, that's good. Thanks, Shaun. And I would just say, in the context of purchasing, in our survey in April 2020, we had something like 33 percent of people saying that they had shopped in person in the previous 30 days. And in August 2020, that number had gone up to 60 percent—so at least from those surveys, seeing an improvement but not back to prepandemic levels.

And now let's move, please, to slide 10. This is question number four. We just showed that there was an increase in remote purchasing, and the idea here is to zoom in a little bit and say, "Where did it happen?" This chart shows the shares of purchases that are remote. And the top two bars there show what we showed in the prior slide, that remote purchases increased from 13 percent of all to 20 percent of all in 2020.

And then you can see that purchases of retail goods, which I would classify, for this purpose, as things that you might buy in a store or on a website—for example, in 2019, maybe the shoes you bought to wear to the office, and in 2020, maybe the firepit you purchased for your backyard. But these retail goods would not include groceries, pharmacy, convenience store. That's a different category for us.

So you can see an increase there from 29 percent to 36 percent. And we do find in our surveys generally that all of us U.S. consumers do a lot of purchasing of food, and cash is very popular for food payments. And the total share of payments related to eating out—restaurant or fast food—dropped from 21 percent of the payments we record to 18 percent. Now these payments are not significant in terms of dollar value, necessarily. But they certainly are significant in terms of the number of payments.

I'm going to ask Shaun, perhaps he would like to chat a little bit about what we're seeing at these food emporiums generally and about this mix of remote and in-person payments.

O'Brien: Yes. Drawing a little bit from the previous slide, where we saw the increase of not-in-person payments—and I had mentioned, we don't yet know whether or not the number of not-in-person payments and the share of not-in-person payments will return to prepandemic levels. And part of the interesting thing that we want to look at going forward, or understand how things may change or not change, is specifically at these food locations, grocery store shopping, your traditional, sit-down restaurants. People would call up their favorite restaurant and order take-out at a place where they traditionally wouldn't do that, and they'd give their credit card over the phone.

And so, as the risk from the pandemic begins to subside, do people start to go out more? Do they go back to grocery shopping? Do they walk in to the quick service restaurant? Do they actually go back and do grocery store shopping at the grocery stores? Or is this a trend that we will continue to see stick over time?

It depends on what your underlying assumptions are here, but it will be interesting to see what happens because my general thought is I think people will want to go back out to eating, I think people will want to go to the grocery store to shop. But it remains to be seen whether these types of purchases will return to that more prepandemic level and might shift the overall not-in-person payments down to the previous trend that we were seeing.

Washington: And I again have two questions that are related—and you may have already answered this, but someone from the audience states that "initial reports from the grocery store industry indicate that online sales have dropped about 4–5 percent from the 2020 levels, with deliveries dropping at a higher rate. What's your opinion as to what will happen in the restaurant industry?"

And then the other question is: "Do you have any subset views on essential shopping versus nonessential shopping or payments?"

Greene: I can take the second question on the subset views, for starters. We do classify payments by merchant. We also know the dollar value, so it's possible to examine, for example, payments more than $100, which start to be fairly unusual. And in the Diary, after people report their payments in various dropdown menus, we ask them to report in their own words what they did. The data source is available online, and it's possible to scan through that data according to various search criteria that you might develop.

As far as predicting what's going to be happening in the future, we really try to report data that we know up until the current time and to avoid too much speculating. I think we've all heard the anecdotal evidence of people who really like to pick their own peppers or tomatoes or whatever it is and aren't going back to the grocery store as soon as possible. But at this point, we don't have data on that.

Now I'll go to slide 11. We're moving away from remote now, and we're going to ask, "How did behavior at the in-person point of sale change?" This is question number five. As you can see, we've already investigated some of the decline in cash use and the increase in cards related to possible attractiveness of using credit, dollar value of purchases, and increasing remote. Another question is, just for purchases made in person—we're going to ask Shaun, our cash expert, to tell us a bit about how cash use changed.

O'Brien: Thanks, Claire. What you can see on the slide now is, over time—really, since 2016—we have seen a decline in the share of cash use for in-person payments. The general trend doesn't really change in 2020, but I guess the difference between 2019 and 2020 and the rest of the trend that we're looking at is between 2016 and 2019, the share of cash payments declined only about 5 percentage points. And yet, from 2019 to 2020 it declined 7 percentage points.

So, there's obviously a little bit of—again, we talked about this before—a combined effect of the long-term trend in addition to the pandemic changing people's preferences for where they're shopping and the types of payment instruments that they were using for in-person payments. I believe even in 2019, for in-person payments, cash was the most-used payment instrument. And that had been the case since 2016 through 2019—and that, I believe, had switched during the pandemic.

And again, just more of an indication of just how large of an impact what we've experienced over the last 15–16 months or so has had on how people are choosing to shop and what that might mean going forward.

Greene: Thanks, Shaun. I imagine we all remember seeing those pictures in the early days of the pandemic of the store clerk with the $20 bills lined up on the counter and the bottle of spray disinfectant. So a whole lot of fears, temporary information, et cetera, are all going into these consumer decisions.

Joanna, would you like to comment on this slide?

Stavins: I think Shaun has said everything that I would say, so we'll see which of these habits are going to stick. I think once you've adopted Venmo or PayPal, you probably won't look back. But it remains to be seen.

Greene: Thanks. Now we'll go to slide 12, please. This is question number six, which you can think of as the inverse of question number five, which is, "Compared to the hundreds-of-years-old payment instrument of cash, how are people using what I'll call "the 21st-century payment instruments" at the in-person point of sale? So this question is number six, "Are consumers adopting contactless?"

What you can see here is that we all have habits, and even in a pandemic, they can be slow to change. Tapping a card remains rare—less than 10 percent of all in-person payments were tapped—and mobile also is rare, barely exceeding 10 percent. You can see, however, that there's an increase for both compared to 2019, which is shown in the red bars.

It's also notable that, especially in 2019, many debit cards did not have a chip that enabled contactless pay. I know my debit card still does not have a chip. So if people say cash is super convenient, and they can throw a few coins on the counter as they're buying their soda and running for the train, this is a question: "When will people—perhaps when, if ever—will people decide that tapping is convenient enough to perhaps take share away from cash?"

And I wonder, Shaun, are you following this question?

O'Brien: Yes. This is something we've been interested in for a little while, and really it's for what you have just said: there's a convenience factor for cash, and one of the things that we've seen in other countries is that there's a correlation between the decrease in cash use and the increase for tap to pay. And we think a lot of that has to do with the convenience factor of just being able to quickly buy what it is you want, tap your card, and then you can get on your way much quicker.

As you had also said, at this point, the widespread availability (I think is the right word) of tap-to-pay cards isn't quite there yet, as it is in some other countries. So as you had said, it's still something we're looking at. And we think it's a convenience factor versus swiping a debit card. Or using the chip-and-PIN and tapping isn't that much different from a form factor, but the convenience of just making it that much quicker is something we want to just understand, really.

Greene: Thanks. And for anybody who's interested in this data, it is based on a very detailed set of questions asking about authorization—"Did you insert?" and "Did you tap?" et cetera. Anyone who is interested in that data could get in touch with me to learn more about it.

Meanwhile, let's move on to slide 13.

Washington: Claire, I wanted to make sure I got this question in about the coin distribution issue: "Is that impacting both cash and card use, and is there still a distribution circulation issue?"

O'Brien: Claire, I can hop in and take that. Yes, there is still a coin circulation issue. A lot of times you would actually see something posted referencing a supply issue. The supply was never the issue, with respect to coin. The issue was how coin was circulating. We've talked a lot about people making fewer in-person payments, and what we suspect is going on is coin traditionally fills up in people's jars at their house, and then at some frequency—once a year, twice a year—they often would just take the coin in to redeem it at their bank or at a local kiosk.

And the change in how people are shopping—and especially during the pandemic, people not wanting to go in and do non-necessary purchasing, I guess you could say—really reduced the flowback of coin from consumers back into the supply chain.

While they're correlated with a decrease in cash use that we got from participants, we can't say if it's that the pandemic was driving cash use lower and then merchants just also had a difficulty getting coins from their banks, or if merchants were actually driving individuals away from cash. We can't say which one caused the decrease in cash use at this point.

Greene: Thanks, Shaun. Now we're moving on to slide 13, where we're making the transition from talking about characteristics of the transaction—where it happens, how much it is—to talking about us, you and me, and what people do based on their underlying circumstances or demographics like income, gender, education, et cetera.

So this is question number seven, which is: "Is behavior change underlying consumer payments' behavior change?" You can see here that work, shopping, and play all changed. Of employed people, in September 2020, one-third worked from home every day and two-thirds of employed people went to work at least one day a week. So most employed people still were going in to work. I'm going to ask Joanna to tell us a bit about working at home and its effect on shopping and payment behavior.

Stavins: We found—again, not surprisingly—that people who work from home were significantly more likely to make purchases online, and they had a higher share of the online purchases compared to people who either work in person or those who are not employed. People who work from home use cash a lot less frequently and credit cards a lot more frequently. So, for example, only 57 percent of those who work from home used cash even once in September 2020 compared to 71 percent of those who work outside the home.

But another thing that I found interesting is that people who work from home sort of fit a different demographic profile. They're higher income, and more highly educated. But what we found in our econometric regression analysis was that even when we were controlling for demographic factors, controlling for income and education, people who work from home exhibited significantly different behavior from those who worked in person. So there are differences that are not due to demographics, but simply because of the lifestyle.

Greene: Thanks. And now we're going to continue thinking about demographics and move to slide 14. This is a continuation of question seven. It is also the case that with people in different demographic groups you can see different behavior during the pandemic, as you could see, of course, prior to the pandemic. This slide just shows by age the percentage of purchases conducted online. The red line represents millennials, who are right now between 25 and 40. And the blue line represents boomers, who are right now between 57 and 75. And you can see that not only did the millennials purchase more online, both in 2018 and 2019—proportionately speaking, compared to the boomers—but they also had a greater increase between 2019 and 2020. I think, Joanna, you've seen other aspects of this also—with this different behavior, also related to demographics.

Stavins: Yes. A lot of demographic characteristics turn out to be significant, and there are substantial differences across demographic groups. There are certainly differences across income groups—higher-income consumers increased their online purchases much more than the lower-income consumers—but a couple that I found particularly interesting is, one is that education was significant (there are a lot of differences across educational groups). And highly educated consumers are more likely to stop using cash, and they had a higher level of online purchases, but those with high school education—so relatively lower education levels—increased their adoption of online purchases more than any other group. So they started at a very low level and their level is still lower than those with a higher education level, but they increased their online purchases, or adoption of online purchases, the most. So I thought that was interesting.

Another difference between genders—as I'm sure Shaun is aware, and Claire and probably some of you—is that women were making fewer cash purchases even in 2019—so before COVID. But they actually lowered their cash use much more than men in 2020, so the difference between genders increased during COVID.

Greene: Thanks, Joanna. Now we have about 12 minutes left, so I would like to skip the poll, which is in slide 14, and go directly to slide 16, please.

This is our final question, question number eight: "Is person-to-person payment moving away from paper?" This slide depicts the percentage share of person-to-person payments made by some card app or other electronic means. For background, paper does still dominate in P2P. Six in 10 P2P payments were made with cash or a check in 2020. It's also interesting to note that PayPal was cited for 16 percent of the P2P payments. Looking forward, about 60 percent of U.S. consumers do have the capacity to make a P2P payment by a noncash method.

So you see the trend line here from 2016 to 2020. Joanna, I'd like to know what you think about that.

Stavins: So electronic—even though paper may still dominate, there was a very large increase in the percentage of consumers who adopted electronic P2P payments. So it was collectively and individually, when we looked at the most common type of mobile app transactions—like Venmo, PayPal, Zelle—there was a large, significant increase in the fraction of consumers who adopted any of those.

The fraction of the adoption rate of electronic P2P increased by 10 percentage points—I believe it was from 48 to 58, or something like that, so there was a significant difference. And again, as we've said in this presentation before, it remains to be seen which of those habits are going to stick. But I think once people figure out how convenient it is to pay somebody electronically, they might not look back.

Washington: And I do have a question from the audience about this topic: "With Venmo announcing that they're going to be charging for certain P2P payments, do you think that will have an impact?" Or maybe that's a good survey question for later on.

Greene: Well, our consumers do rate payment instruments according to cost, convenience, security, ease of setting up. And the data certainly does show that people care about costs.

Joanna, do you want to follow up on that a bit?

Stavins: Yes, people are very cost-sensitive, and I think that they'll avoid... So, very anecdotally, I know of at least one case when a service provider refused to accept Venmo or charged for accepting Venmo and instead offered Cash App, which was new to me. So I think that for personal transactions, I don't think there is a charge. But for any kind of commercial transactions, there will be a charge, so I think that service providers will look to adopt other, alternative free payment instruments and methods.

Greene: Now we're moving to slide 17, please. So those are our eight questions about purchases and P2P payments in the pandemic. I would like to leave you with the idea that at this point, it is quite difficult to distinguish the signal from the noise. And that all three of us are eagerly awaiting the results of our 2021 survey, which goes in the field in just three months.

So maybe I'll ask Shaun what questions he's going to be most avidly anticipating.

O'Brien: I think for me the "not-in-person" breakdown by merchant—specifically for the food and grocery store data that we had shown earlier. I really think that will be an indication of just how likely that preferences are to stick in the future, because that was the area where initially we had maybe thought that probably the least likely location where people are going to make "online purchases" would be at grocery stores and sit-down restaurants.

So if that really seems to hold, then I'd probably adjust my expectations going forward at that point.

Greene: Joanna?

Stavins: Well, I'm always interested in credit cards, so I'll certainly be looking out to see what happens with credit card transactions and credit card revolving. I was very encouraged by the fact that people have been paying back their debt, because credit card debt, as we all know, is very expensive. So hopefully that will continue.

And we know that people have more money in the bank. The saving rate has gone up. Unfortunately, there is a lot of discrepancy across income cohorts, so it might not be uniform. But I'll be interested to see what happens with revolving debt by income cohorts.

Greene: Great. Thank you. And now, on slide 18, you can see the references underpinning this talk. I'm not going to belabor this slide, but when you download the PDF you can click through on any of the links, including to the USC COVID survey. I work in the Retail Payments Risk Forum at the Federal Reserve Bank of Atlanta, where we blog every Monday at Take On Payments.

And this is slide 19. You can sign up for updates at atlantafed.org.

So, thanks very much for your attention, and we'd like to take more questions if we have them.

Washington: And we do: "Will you please share what the seven payment instruments were again?"

Greene: Paper: cash, check, and money order; card: credit, debit, and prepaid; and then two ways of paying via ACH, which we call either online banking bill pay or bank account number payment, and that's when you go to the third-party website and put in your routing number and your account number.

Washington: Thank you. "Approximately how many respondents are part of the survey?" And as a follow-up question: "If it's based out of southern California, are the respondents regionally diverse?"

Greene: Yes, this is a nationally representative survey. And in this, the COVID year, we had about 1,900 respondents to this survey. In prior years, we've had more respondents—as many as 3,000. This year we cut our respondent group in half, attempting to improve survey methodology. You can follow up with me if you want to know more about that.

Washington: Excellent. Thank you. "Are there any plans to do a short, pulse interim survey before the October diary?"

Greene: Yes, and Shaun can tell you about the pulse survey that we conducted in April 2021.

O'Brien: Yes. The third survey, as Claire had mentioned, went from mid-April to the end of May. We are currently working on analyzing the data and writing up the results and are hoping to provide a publication on the CPO website in the next month or two. We don't have a definitive publication date yet, but the results will be coming out shortly.

Greene: There are papers at both the Federal Reserve Bank of San Francisco website and at the Atlanta Fed website. And you can also download data at the Atlanta Fed website.

Washington: Thank you. You said that there was 60 percent paper use for P2P, and then this audience member saw 29 percent for electronic. What would the other 10 percent be for P2P?

Greene: Probably a math mistake when I made the slide, for which I apologize.

Washington: Good clarification. Let's see. "Will the session be recorded?"—and I know that's "yes." We will share a recording on our website that Claire had on slide 19. Right?

And the next question: "Any insights into how historically cash-only customers are adapting to the digital economy? How are they shopping online?"

Greene: I do not have any analysis of cash-only customers in 2020. I can tell you that in prior years, people without a bank account used cash for a very, very high proportion of their payments.

Washington: And then just a comment, that someone is hearing anecdotally, that many of the traditional sources of coin deposits have moved to electronic cashless. So not only have consumer payments changed but also major depositors have been removed from the supply chain.

Greene: Shaun, do you want to say anything about that?

O'Brien: I guess I would say I wouldn't be surprised, but I will also have the disclaimer that I am not extremely tied into the supply chain, the "coin" side of the Cash Product Office house. But I mean, honestly, nothing would surprise me in 2020 and 2021.

Washington: Thank you. And the last comment is, "Well done. Very interesting." And that's all I have for you.

Greene: Thanks, Jessica. Thanks very much, Meagan, thanks for organizing. And everyone: thanks for attending, and we hope you'll get in touch if you have any questions about this data. We like it when people are able to use it.