Cash, Cards Still King in 'How America Pays in 2016' Study

5/13/2016

Americans’ use of a wide array of payment options, as well as their demand for other methods, is driving innovation in the payments category, according to a new research report examining consumer preferences and most used payment tools.

Shopping payment processes has become increasingly important and, in turn, plays a greater role in influencing consumers’ perceptions and loyalty, the Blackhawk Network study found.

The research, “How America Pays in 2016,” surveyed more than 1,000 Americans in March 2016 to examine how they pay today, their preferences for traditional and emerging payment tools, and the role payments play in their purchasing decisions.

“The role of payments in Americans’ lives is increasing in importance. Consumers now have so many payment tools at their disposal; they can be selective about how they pay, and are even influenced on where to shop based on their experiences paying,” said David Tate, SVP of products and marketing at Pleasanton, Calif.-based Blackhawk Network. “This year, we are seeing consumer-driven innovation in payments; gift cards are being used for self-use, peer-to-peer payments have a foothold, mobile wallets continue to rise in adoption, and the gift card exchange industry has taken off. Not surprisingly, among this innovation, the role of some legacy payments tools, like checks, continues to decline.”

Key findings from the “How America Pays in 2016” consumer survey, now in its second year, include:

Brand perception and loyalty is directly related to payment experience: More than three-quarters of the consumers surveyed (78 percent) reported that their experience paying affects their overall perception of a website, and their willingness to visit it again. Sixty-nine percent reported that their experience paying affects their perceptions of a store or restaurant, and their willingness to go back.
Consumers drive payment innovation: By spurring the creation of new payment technologies, finding alternative applications for existing payment tools or embracing a wide array of burgeoning payment products, consumers are inciting significant innovation in payments. For example, 19 percent of consumers have now used a gift card exchange — a tool born directly out of consumer demand. Six percent of smartphone owners now use peer-to-peer payments — a novel technology that provides a quick, inexpensive alternative to money transfers or checks. Additionally, 44 percent of consumers planned to purchase gift cards for self-use this year — a trend that retailers and marketers are now seizing on.
Roles of checks, cash declining: Eighty-seven percent of Americans used cash to pay in the past year, down from 93 percent the year before. Consumers are primarily using cash for purchases of $20 or less. Check usage is also declining; 60 percent of Americans used checks in the past year, versus 68 percent the year before. The primary circumstances in which people used checks were to pay bills (23 percent) and pay other individuals (18 percent).
Consumers have embraced alternative payment tools: Mobile wallet adoption was up 8 percent over last year. Of consumers who've used mobile wallets and peer-to-peer payments, 80 percent reported that they are using mobile wallets the same amount, or more than they did last year, and 73 percent were using peer-to-peer payments the same amount or more than they did last year. Adoption of these payments methods among smartphone owners was also significant: 33 percent had a mobile wallet, and 6 percent used peer-to-peer payments.
Millennials go modern: These demographics, often coveted by retailers and marketers, have specific preferences when it comes to payment tools. Not surprisingly, millennials use newer payments methods at a higher rate than the general population, including mobile wallets and peer-to-peer payments, and they use cash slightly less.
Shoppers’ love for gift cards remains: While other payments tools wax and wane in popularity, gift cards have remained popular for many years. Retailers should not take this revenue stream for granted. Eighty-four percent of shoppers planned to purchase more or the same amount of gift cards this year as they did last year. And 74 percent of consumers hoped to receive gift cards this year. Additionally, 57 percent of shoppers had unused gift cards and e-gifts at the time of the survey, and more than half of shoppers would be interested in using a gift card exchange that's online or housed in an in-store kiosk, while 40 percent would be interested in a mobile app gift card exchange.
Consumers have payment preferences for their rewards: When it comes to promotional and loyalty rewards paid to consumers by the stores where they shop or by the service providers they use, shoppers preferred prepaid debit cards and gift cards (45 percent) and PayPal (38 percent), over other payment options like checks or merchandise.
e-Codes and e-gifts are complements to physical products: A full 69 percent of consumers were familiar with e-codes and e-gifts (digital gift cards delivered to recipients via email, social media or text message, and discounted e-codes that can be purchased from sites like Groupon). More than half of consumers have purchased e-codes or e-gifts and planned to do so again this year. With adoption of plastic gift cards remaining high as well, it's evident that e-codes and e-gifts will remain a complement — not replacement for — traditional gift cards.

Cash and cards were still the most used payments methods, with select digital offerings close behind: Shoppers used the following payment methods over the past year:

Cash: 87 percent
Debit card: 75 percent
Credit card: 69 percent
PayPal: 67 percent
Check: 60 percent
Merchant-specific gift card: 43 percent
Prepaid debit card: 38 percent
Money transfer: 18 percent
Mobile wallet: 17 percent
Peer-to-peer payments: five percent
Bitcoin: three percent

How America Pays is an internet-based survey conducted by Blackhawk Network in March 2016. The sample size included 1,037 American respondents, ages 18 and up.

An inforgraphic of the “How America Pays in 2016” research study can be found here.

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