A Core Group of Consumers Continues To Prefer Cash, Researcher Finds

The debut of cashless stores has led to pushback by several cities, the state of New Jersey, and a member of Congress concerned that card or mobile-payments-only options will leave cash-dependent consumers unable to shop in such stores. Now, new research from the Federal Reserve Bank of Atlanta concludes that a proliferation of cashless stores could indeed impose a burden on consumers who don’t have a credit or debit card.

The “Cashless Stores and Cash Users” working paper by Atlanta Fed researcher Oz Shy says some consumers prefer cash even if they have the option of buying prepaid cards. The research is based an analysis of data collected by the Federal Reserve’s separate survey and diary of consumer payment choice studies in 2017, the latter of which includes information on thousands of payment transactions.

Consumers who have at least one credit card and a non-prepaid debit card on average make only about a third of their in-person payments in cash, according to Fed data.

“Among consumers who do not have credit or debit cards, 86.4% prefer paying with cash,” Shy tells Digital Transactions News by email. “This is what economists call ‘revealed preference.’ That is, these consumers have an option to purchase prepaid cards, but they show us—reveal—that they prefer cash.”

Some 8.5% of U.S. consumers with household incomes below the median household income of $61,000 did not have a credit card or non-prepaid debit card in 2017, according to the Fed. This subset of Americans isn’t alone in preferring or depending heavily on cash.

“A complete transition to cashless stores would be extremely difficult in any country (if not impossible) particularly because cash use at the point of sale remains strong in most countries,” Shy’s paper says.