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Report
How do consumers make their payment choices?
Payment transformation has generated a shift from paper to cards and electronic payments in the United States, but there is also a large degree of heterogeneity among consumers in how they pay. We present factors affecting consumer payment behavior, show data on how consumers pay in the United States, and summarize existing literature on consumer payment choice. On the supply side, technology, regulation, and cost affect payment behavior. On the demand side, consumer demographics and income, consumer preferences, and consumer assessments of payment method attributes have all been found ...
Working Paper
Consumer Payment Choice for Bill Payments
Why do US consumers pay their bills the way they do? Using data from a recent diary of consumer payment behavior, we find that the type of bill consumers are paying and how they are paying (online or automatically) are important factors in determining the payment method, in addition to the dollar value of the bill and the demographic and income profile of the individual who is paying. In contrast, dollar value and demographic attributes are found to be the most important factors determining the payment instrument chosen for purchases. Consumer choices for bill payments are somewhat ...
Working Paper
Personality Traits and Financial Outcomes
The Big Five personality traits—openness to experience, conscientiousness, extroversion, agreeableness, and neuroticism—are widely used in understanding human behavior. Using data collected from a survey and diary of consumer payment choice, we investigate how the Big Five traits affect three financial outcomes: being unbanked, holding a credit card, and carrying credit card debt. Although each personality trait is correlated with each of the financial outcomes we examine, they mostly become statistically insignificant when we control for demographics and income in regressions. Carrying ...
Working Paper
Optimal recall period length in consumer payment surveys
Surveys in many academic fields ask respondents to recall the number of events that occurred over a specific period of time with the goal of learning about the mean frequency of these events among the population. Research has shown that the choice of the recall period, particularly the length, affects the results by influencing the cognitive recall process. We combine experimental recall data with use data to learn about this relationship in the context of consumer payments, specifically for the mean frequency of use of the four most popular payment instruments (cash, credit card, debit card, ...
Working Paper
Payments Evolution from Paper to Electronic Payments by Merchant Type
The use of paper instruments—cash and checks—has been declining in the United States, and consumers have been gradually replacing paper with cards and electronic payments. Stavins (2021) examines the evolution of payments from paper to cards and electronic payments, while Shy (2020) shows the payments landscape across merchant types. This paper combines the cross-sectional analysis across merchants with the aggregate time series study to analyze the evolution of consumer payments by merchant type. Using data from a representative diary survey of US consumers collected annually over the ...
Working Paper
Has COVID Changed Consumer Payment Behavior?
The COVID-19 pandemic has caused large changes in consumer spending, including how people make their payments. We use data from a nationally representative survey of U.S. consumers collected before COVID in 2018 and 2019 and during COVID in 2020 to analyze changes in consumer payment behavior during the pandemic. We find that compared with their payment behavior in 2019, consumers had shifted some of their purchases from in person to online by fall 2020, significantly lowered their use of cash for purchases, and shifted their person-to-person (P2P) payments away from paper (cash and checks). ...
Working Paper
Consumer Payment Behavior by Income and Demographics
Despite the introduction of an array of innovations and new payment options for consumers over the last decade, income and demographics remain significant predictors of payment behavior. Using data from a 2023 consumer payments diary, we find that income, age, and education are significant predictors of which payment instruments consumers adopt and use. These associations hold not only for traditional payment instruments—cards and paper—but also for innovations such as mobile apps; buy now, pay later (BNPL); and cryptocurrency. In 2023, less educated consumers were significantly less ...
Discussion Paper
An Update on Trends in the Debit Card Market
On March 20, 2007, the Payment Cards Center of the Federal Reserve Bank of Philadelphia hosted a workshop led by Stan Paur, chairman of PULSE EFT Association LP, a Discover Financial Services LLC company, and Tony Hayes, vice president of Dove Consulting, a division of Hitachi Consulting. Paur and Hayes shared findings from PULSE?s 2007 Debit Issuer Study, conducted by Dove Consulting with 55 debit card issuers of varying sizes. In examining developments in the debit card market, Hayes and Paur shared survey results and provided additional insights into four key areas: performance metrics, ...
Working Paper
Credit Card Debt Puzzle: Liquid Assets to Pay Bills
Using transaction data from a US consumer payments diary, we revisit the credit card debt puzzle—a scenario in which consumers revolve credit card debt while also keeping liquid assets as bank account deposits. This scenario is very common: 42 percent of consumers in our sample were borrower-savers in 2019 (those who carry $100 or more in credit card debt and $100 or more in liquid assets). We explain the puzzle by showing that consumers need their liquid assets to pay monthly bills and other necessary expenses, including mortgage or rent. More than 80 percent of bills by value were paid ...
Working Paper
Credit card debt and consumer payment choice: what can we learn from credit bureau data?
We estimate a two-stage Heckman selection model of credit card adoption and use with a unique dataset that combines administrative data from the Equifax credit bureau and self-reported data from the Survey of Consumer Payment Choice, a representative survey of US consumers. Even though the survey data from the borrowers vary somewhat from the data provided by the lenders, the results based on the merged data are qualitatively similar to those based exclusively on self-reported surveys. This finding suggests that if administrative data are not available, it might be sufficient to use survey ...