The Evolving State of Cash and Electronic Payments in the U.S.

As consumers increasingly adopt electronic methods of payments in their daily routines, the shifting mix of cash, checks, ACH, and electronic payments methods are often top-of-mind when discussing changes occurring in the banking and payments industries. And while demand for cash and cash-like payments instruments remains strong (the amount of cash in circulation was estimated to be $1.6 trillion in 20161, and continues to increase), the demand for alternative payments methods continues to grow as well.

Examples of the trends and growth of non-cash payments can be found in studies from the Federal Reserve Bank of San Francisco and the triennial Federal Reserve payments studies. Regarding the former, the 2015 study shows the increased use of non-cash alternative payment methods.

Still, cash remained the most frequently used retail payment instrument in 2015, and cash was used in nearly one-third (32 percent) of all transactions, including bill payments. This is down from 40 percent reported in 20122. Consumers used debit cards for 27 percent of their transactions in 2015, followed by credit cards for 21 percent of transactions. Electronic payments (e.g. ACH transfers and online billpay) and checks comprised a small share of transaction volume, though the value of these payments tended to be higher than cash, debit, or credit payments3.

The 2016 Federal Reserve Payment Study also found that households made 78.6 non-cash payments per month on average in 2015, about 95 percent more than the 40.3 non-cash payments they made per month in 20004. In total, this corresponds to 117.5 billion consumer payments in 2015 vs. 50.7 billion in 2000, a CAGR of 5.8%.

Changes in shopping and purchasing behavior are a driver in changes in payments habits. For example, In-person electronic payments via cards were the most common cash and check replacements over this time period, often driven by merchant acceptance of cards and online banking billpay solutions that replaced ACH transfers.

Similarly, the Fed study noted that businesses are also changing their payments habits, albeit at a slower rate. Their use of non-cash payment transactions rose from 21.2 billion in 20004 to 26.6 billion, a 1.5% CAGR. Primary reasons included the replacement of check with ACH payments, and to a lesser extent, increases in card use. Also, businesses made almost a third (32.8) of their non-cash payments using checks in 20155.

Globally, some countries are accelerating the use of non-cash payment methods. A study by ING Bank found that 34% of survey respondents in Europe, and 38% in the U.S. said that they would be willing to go cash-free6.

A recent NBC story noted that Sweden may be cash-free by 2023, as cards, and to a lesser degree mobile apps, continue to grow in popularity7. The story also includes a reference to research from the Copenhagen School of Economics that showed that although 97% of retailers in Sweden accept cash, only 18% of transactions involve cash, and the amount of cash in circulation has dropped 40% in the past seven years. The trends suggest cash usage will be negligible in Sweden within six years, though cash will still be in circulation and stores will still accept cash for a few years after that. So far mobile payments have not taken off, making up less than one percent of payments in Sweden, though that percentage is expected to increase rapidly over the next few years as consumers get more comfortable with the technology.

Still, cash remains important for many consumers in the U.S. American consumers use cash for roughly half of all transactions valued at less than $50, and they choose to use cash more frequently than any other payment instrument, including debit or credit cards8.

Also, cash is either the most used or second most used payment instrument across a wide array of spending categories9, so the demand for cash and cash-like products will remain strong for quite some time, and the demise of cash in the U.S. will not occur anytime soon. However, financial institutions and merchants should be mindful of their customers’ increasing demand for alternative payment options, and be ready to meet their evolving and expanded payments needs.




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For more information on this topic, please contact the author, Ed O’Brien.  Mr. O’Brien is EVP, Research & Strategy at ath Power Consulting.  He can be reached at

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