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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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December 23, 2019

New Data Posted for Federal Reserve Payments Study

If you're looking for payments reading during the holidays, take a look at a new report, the Federal Reserve Payments Study 2019, which was published last Thursday on the Federal Reserve's websiteOff-site link.

The report finds that growth in card and ACH payments has accelerated.

Here are some key findings:
  • The number of ACH credit and debit transfers grew by 6 percent a year between 2015 and 2018, exceeding the 4.9 percent per year growth rate recorded for the period from 2012 to 2015.
  • Debit and credit card payments grew at an accelerated rate of 8.9 percent a year between 2015 and 2018, up from the 6.8 percent yearly rate of increase from 2012 to 2015.
  • For general-purpose cards overall, the value of remote payments in 2018 nearly equaled that of in-person payments.
  • More than half of in-person general-purpose card payments were chip-authenticated, up from 2 percent in 2015.
  • Payments made by check fell 7.2 percent a year from 2015 to 2018.

The 2019 Federal Reserve Payments Study covers card (credit, non-prepaid debit, and prepaid debit), ACH, and check payments and ATM withdrawals. In these days of fintech and new ways to pay with a phone or fingerprint, these core noncash payment types are used not only in traditional ways but also to make possible alternative payment methods and services.

We look forward to continuing the payments conversation with you on January 6, 2020, when I will be challenging you to a game of pay-with-your-phone bingo.

November 25, 2019

We Are Thankful For...

Several years ago, I began the practice of making a list around Thanksgiving of things I am thankful for. I was pondering what I might include on my list this year while I was stuck in traffic behind an awful wreck I was thankful I wasn’t involved in. And then the idea hit me that maybe we at the Risk Forum should create our own list focused on what we are thankful for in payments.

To keep the list at proper blog length, I asked each Risk Forum member to name just one item. Without further ado, the Risk Forum presents to you our 2019 Thanksgiving week "What we are thankful for in payments" list.

  • Nancy Donahue, project manager: I’m thankful that my debit card has only been breached once this year and although the criminal lived it up at several fast food restaurants and c-stores, it was less than $100 total and I got my money back!
  • Claire Greene, payments risk expert: I am thankful that direct deposit lets me put my finances on autopilot. I’ve split my paycheck into different accounts: one for retirement, one for the mortgage, one for saving, and one for everyday expenses.
  • Douglas King, payments risk expert: I am thankful for the ability to pay via self-checkout at my local grocery store and receive cash back when using my debit card.

The Retail Payments Risk Forum folks: Pictured from left: Jessica Washington, Douglas King, Nancy Donahue, Dave Lott, Catherine Thaliath, Julius Weyman; Not pictured: Claire Greene

Pictured from left: Jessica Washington, Douglas King, Nancy Donahue, Dave Lott, Catherine Thaliath, Julius Weyman; Not pictured: Claire Greene

  • Dave Lott, payments risk expert: I am thankful for law enforcement and other security professionals who work diligently to protect the integrity of our payments system.
  • Catherine Thaliath, project management expert: I am thankful for credit card rewards programs. It is nice to get rewarded with cash back or even a free plane ticket just by using your credit card for everyday purchases!
  • Jessica Washington. payments risk expert: I am thankful for payments industry collaboration. This year I have seen improvements in fraud information sharing across stakeholders; partnerships between fintechs, financial institutions, and payment networks to promote financial inclusion; and working groups embracing emerging payment innovations.
  • Julius Weyman, vice president and forum director: I am thankful that I can write a check where it makes sense; pay online where it makes sense; get paid via ACH (no choice in that, but wouldn’t choose otherwise); pull bills from a real wallet (not the fake kind) and pay that way, where it makes sense; and use a card (and get rewards), which almost always makes sense and is the one I use the most.

And we are thankful for YOU: our readers of Take On Payments and supporters of the Risk Forum. We sincerely appreciate your comments, kudos, and criticism, and hope that you all find value in the information we provide and share. As we enter into these crazy last weeks of 2019, we wish you and yours a wonderful holiday season.

October 7, 2019

Payments Webinar October 10: Cash in the 21st Century

As I write this, I am drinking my morning cup of joe. For me, that means half caf/half decaf, then cut in half with microwaved nonfat milk. (Slurp.)

Day in, day out, I want it just that way. No sugar for me. Nonfat milk, not 2 percent. Black only when I open the door to an empty fridge.

Odds are, you're like me when it comes to coffee and payments. Your habits—and mine—are sticky. We've found something that works for us and—day in, day out—we take our coffees and choose to pay the same way. These are our preferences.

What happens when we change our minds about what we prefer? Shaun O'Brien at the San Francisco Fed has been looking into the relationship between our stated preferences for making in-person purchases and the payment instruments we use in the moment.

In an economic model that incorporates consumer demographics, household income, transaction characteristics, and the payee, Shaun finds that, over time, a change in stated preference eventually results in an increased probability of using a newly preferred payment instrument.

Note that word eventually.

For example, say I stated a preference for cash in 2016 and then switched to a stated overall preference for debit card in 2017. It might not be until 2018 that you would start to see a small change in my mix of payments, with relatively less use of cash and more of debit. Like a coffee habit, my preferred payments habit is slow to change. (Keep in mind that, as I have blogged previously, preference is one of a number of factors that are important, including, for example, what a payee is willing to accept.)

Whatever your morning beverage, I hope you'll join Shaun, the Atlanta Fed's Oz Shy, and me for the next Talk About Payments webinar, October 10, 2019.

We'll look at current data from the Survey and Diary of Consumer Payment Choice and new research—including Shaun's findings reported above—to investigate the 5 Ws and also the How of cash:

  • WHAT is happening with cash?
  • WHO uses cash?
  • WHERE do consumers use cash?
  • WHEN do consumers use cash?
  • WHAT might cause cash users to switch to another payment method?
  • HOW do consumers get cash?

This webinar is open to the public but you must register in advance to participate. (Registration is free.) You can register online. Once registered, you will receive a confirmation email with login and call-in information.

Date: Thursday, October 10, 2019
Time: 1–2 p.m. (ET)
Register now!

September 16, 2019

Is There a Generation Gap in Cash Use?

How different are millennials from boomers in their reported payment habits, especially regarding their use of cash? New data from the Survey of Consumer Payment Choice, out this month, lets us look at age segments using the interactive charts accompanying the report.

For example, in 2018, consumers overall made 17 payments a month in cash. Drilling down, consumers aged 25 to 34—that is, millennials—used cash for 15 payments per month. Consumers 55 to 64—the boomers—used cash for 18 payments a month.

It's good to put these numbers in context. Here's a fact that surprised me: the younger group makes more total payments per month (73) than does the older group (67). That means that, as a percentage share of all payments, the difference by age is more pronounced:

  • Millennials: 21 percent of their payments in cash
  • Boomers: 27 percent of their payments in cash

The differences are similar when we look at paper checks, which the younger group used for 2 payments per month (3 percent of their payments) and the older group for 4 payments per month (6 percent).

Chart 01 of 01: Payment method use by age range

You'll notice in the chart that payments instrument usage has been relatively stable for all the age groups since 2015.

Millennials' relatively lower use of cash doesn't mean, however, that the cashless society is going to arrive any time soon. In 2018, 85 of 100 consumers used cash in a typical month. And, in an analysis that incorporates a complete set of demographic variables plus income, differences by age could prove not so relevant. So, is there a generation gap in cash use? Yes. Does it mean the end of cash? No.

The charts at the website let you look at consumer payment choice by household income group and by the type of transaction. For example, you can examine how consumers' use of payment instruments is different for P2P payments than for bill payments. Check them out.