payments research

2021 Findings from the Diary of Consumer Payment Choice

Kelsey Coyle, Laura Kim and Shaun O’Brien

May 5, 2021

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Every October the Federal Reserve conducts an annual payment study, the Diary of Consumer Payment Choice (Diary), to better understand payment trends and habits of the U.S. population. 1 This year’s Diary was conducted seven months into the COVID-19 pandemic. Given the timing of the study, the analysis shows some significant changes in consumers’ payment behavior, though it is unclear if any of these changes will persist once the pandemic has ended. As with previous Diary studies, a demographically representative sample of adults from the Understanding America Study panel were asked to participate. 2 There were 1,537 participants who took part in the 2020 Diary study. Each participant was instructed to report all their transactions, including cash withdrawals and deposits, over an assigned, consecutive three-day period. All transactions are then aggregated and, unless otherwise noted, reported on a monthly, per-person basis. The high-level findings from this year’s Diary study are:

• U.S. consumers made an average of 34 payments in October 2020, down from 39 in 2019
• Cash use accounted for 19 percent of all payments, down seven percentage points from 2019
• Small-value payments, defined as transactions under $25, declined by 26 percent
• Total value spent increased from $4,236 to $4,760
• Average value of cash held in consumers’ pocket, purse, or wallet increased to $74, up $20 from 2019
• Approximately 72 percent of U.S. consumers reported making an in-person payment over their three-day reporting period, down from 91 percent in 2019
• Total spending on not-in-person, non-bill payments increased substantially at grocery stores, dining establishments, and general merchandise locations

As noted in the April and August supplemental Diary papers, consumer payment behavior changed dramatically and the pandemic continues to affect how consumers shop. 3 Total payments in 2020 declined approximately eleven percent, or four total payments, compared to last year. Of the 35 total payments made in 2020, cash, debit card, and credit card payments accounted for approximately 19 percent, 28 percent, and 27 percent, respectively.

The decline in total payments in 2020 was mostly due to a decrease in the number of small-value payments under $25, which declined by approximately four payments per month. This change disproportionately affected the number of cash payments, which have historically accounted for most payments under $25. In 2020, consumers reduced the number of small-value cash payments by more than 40 percent compared to 2019, a decrease of three cash payments per month.

As a result of the pandemic, the share of people reporting at least one in-person payment during the Diary period dropped to 72 percent, a 19-percentage point decline compared to the 2019 Diary. While not directly comparable, supplemental surveys conducted in April and August found the number of consumers making in-person payments dropped sharply in April and began to increase throughout late spring and early summer. 4

As online shopping increased, the average number of not-in-person payments made to grocery stores, dining establishments, and general merchandise stores increased slightly by approximately one payment per person. However, the total value of not-in-person spending per person at these merchant types increased substantially, doubling from approximately $110 in 2019 to $212 in 2020.

The paper consists of four sections, with each section exploring various aspects of cash use during the pandemic. Section 1 details changes in payment trends, including the share of individuals making in-person payments, payment instrument use for not-in-person payments, and the share of payment instrument use by purchase amount; Section 2 discusses how age and stated payment preferences influence payment use; Section 3 explores cash holdings by demographic cohort; and Section 4 outlines in-person and not-in-person payment use by merchant type. Appendix A provides an overview of the methodology. Additional information about the 2020 Diary is available at the website of the Federal Reserve Bank of Atlanta. 5

Note Regarding COVID-19

While the paper highlights changes in payment behavior that may be accelerated by the pandemic, it is still unknown whether these changes will be transitory or permanent in the long run.  The Diary data is examined for year-to-year comparisons of payment behavior, and the authors acknowledge that payment behavior has changed throughout this pandemic. Therefore, the Cash Product Office and Federal Reserve of Atlanta sought to capture data on changing payment practices during the pandemic through a series of supplemental surveys, conducted in April and August of 2020. The findings from these two supplemental studies were published in two separate papers and highlighted important changes in payment behavior observed during the pandemic. The first supplemental paper describes changes in cash holdings, changes in choice of payment instrument, and cash avoidance. The second supplemental paper discusses in-person shopping behavior, consumer’s experience with the coin shortage, and consumer cash holdings.

Acknowledgements

This paper would not have been possible without the support and contributions of the following individuals. From the Atlanta Fed: Kevin Foster, Claire Greene, Marcin Hitczenko, Brian Prescott, and Oz Shy. From the Boston Fed: Joanna Stavins and Ruth Cohen. From the San Francisco Fed: Tom Flannigan, Simon Kwan, and Justin Wray. From the Cash Product Office: Lauren Brown, Alexander Bau, Benjamin Gold, Jamie Law, Kelly McGuire, Margaret Riley, Louise Willard, Kathleen Young, and Roger Replogle.

Section 1. Trends in Cash Usage

Total number of transactions and share of cash usage declined during the pandemic

The COVID-19 pandemic changed many aspects of life in 2020. How U.S. consumers made payments is no exception. Given the nature of the coronavirus, consumers limited in-person activities due to the fear of infection and governments enacted shelter-in-place orders and restrictions, many of which remained in place throughout the fall. Thus, the way people engaged in purchases and payments shifted significantly in 2020. In April and August, the Cash Product Office and Federal Reserve Bank of Atlanta conducted two short surveys to quickly gauge how consumers were paying during the pandemic. This year’s Diary provides a more detailed insight into consumer payment behavior and trends during the pandemic.

In October of 2020, U.S. consumers reported making an average of 34 payments per monthdown from 39 payments in 2019. Despite the decline in the number of payments, consumers’ monthly spending increased to an average of $4,760 in 2020, up from $4,236 in 2019 and $3,999 in 2018. 6 This suggests consumers consolidated their purchases into fewer transactions, combining transactions for multiple products at one store or on one platform.

Cash’s share of all payments decreased by seven percentage points in 2020 (Figure 1), a larger decline than experienced in any category over the past two years. Meanwhile, credit cards’ share of payments has increased since 2016, most recently increasing from 24 percent of payments in 2019 to 27 percent of payments in 2020. However, the increase in credit cards’ share of payments was primarily driven by a decrease in the use of other payment instruments rather than a direct increase in use of credit cards; the number of reported credit card payments remained steady from 2019 to 2020 at 9 payments per month. For the first time since the start of the Diary in 2016, credit cards’ share of payment instrument usage surpassed cash. Debit cards remained the most frequently used payment instrument, accounting for 10 of the 35 payments made, and a 28 percent share of payments.

Figure 1 Share of Payment Instrument Use by Year

View chart as text +

Year	Cash	Credit	Debit	ACH	Other
	26%	23%	28%	11%	11%
	26%	24%	30%	11%	9%
	19%	27%	28%	12%	14%

Figure 2 shows the share of individuals making in-person payments over their three-day diary in 2020 (72 percent) was significantly lower than in 2019 (91 percent).  The findings were higher than the results from the supplemental April or August survey, though the supplemental surveys asked whether any in-person payments took place over a longer period of time. 7 The results from October 2020 are not surprising when compared to the results from the April and August surveys, given the easing of shelter-in-place orders and increasing comfort among consumers to conduct in-person payments as positive COVID-19 cases decreased from mid-summer to early fall. 8

Figure 2 Share of Participants Reporting In-Person Payments During Diary

• October 2019: 91%
• October 2020: 72%

While the share of people making in-person payments declined in 2020 compared to 2019, most non-bill payments continue to be conducted in person. In each prior Diary study, cash was the most frequently used in-person payment instrument, accounting for 36 percent of in-person, non-bill payments in 2018 and 35 percent in 2019. 9 At the onset of the pandemic, the share of debit and credit cards used surpassed cash as the share of cash use decreased seven percentage points from 2019 to 28 percent (Figure 3). 10 While fewer consumers made in-person payments, those that did experienced a greater share of requests by merchants to not use cash. The second supplemental August survey found approximately 45 percent of those who shopped in person reported that merchants encouraged consumers to avoid using cash at least some of the time. 11

Figure 3 Share of Payment Use for In-Person Non-Bill Payments

• Credit: 31%

Between 2016 and 2019, cash use for small-value payments was declining as debit and credit cards’ share of small-value payments trended upward. While consumers who shopped in person experienced greater payment steering away from cash in 2020, the data suggest the decline in cash use was likely due to fewer total small-value payments, defined as payments of under $25,  rather than a substitution of cash payments with cards. Consumers have traditionally used cash most frequently to make small-value payments and the decrease in the total number of small-value payments likely led to a decrease in the overall use of cash. Consumers reported making six fewer small-value payments, with four fewer cash payments and two fewer debit card payments. While substitution between cash and debit cards and credit cards likely took place, the main reason why cash and debit card use declined is due to the reduction in the total number of small-value payments.

Figure 4 Mean Monthly per Person Payments Under $25

Year	Cash	Credit	Debit	Total
	9	5	6	19
	8	4	6	18
	4	4	4	12

Section 2. Who is using cash?

Payment preference for cash declined

The change in the payments landscape during the pandemic accelerated the shift in preferences from cash towards credit cards and debit cards, a trend which had been changing rather slowly over the five years prior to 2020. As with each annual Diary study, participants were asked to report the payment instrument they preferred to use for non-bill payments prior to their 3-day reporting period. In 2020, the share of individuals who preferred to use cash for non-bill payments declined by 5 percentage points compared to 2019. For comparison, cash preference declined four percentage points between 2016 and 2019. The decline in consumers stating a cash preference was offset by consumers stating a preference for credit and debit cards, which increased by 4 and 1 percentage points, respectively (Figure 5). These three instruments accounted for 94 percent of stated preferences and have accounted for at least 93 percent of stated preferences since 2016. Observed payment behavior continued to generally align with stated payment preferences, with participants continuing to make most of their payments with their preferred payment method.

Figure 5 Payment Instruments Preferred for Payment

Year	Cash	Credit	Debit	Other
	27%	24%	42%	7%
	24%	29%	42%	5%
	22%	29%	42%	6%
	23%	29%	42%	7%
	18%	33%	43%	6%

Cash use declined across all age groups

In contrast to prior years, the share of cash payments declined for every age group (Figure 6). This overall shift is not surprising given the role COVID-19 had in reducing the number of in-person payments, the only venue in which cash can be used for payments. Previously, the share of cash use has been consistently the highest among individuals aged 18 to 24 and those 65 and older (33 percent for both age cohorts in 2019) and lowest among those aged 25 to 34 (18 percent in 2019). While that pattern is still present, the share of cash use declined the most for individuals between 18 to 24 years old, by 13 percent year-over-year.

Figure 6 Cash Use Share by Age Group and Year

Age Group	2016	2017	2018	2019	2020
	32%	34%	34%	33%	20%
	24%	23%	18%	18%	11%
	32%	26%	19%	20%	16%
	33%	34%	27%	25%	17%
	34%	34%	31%	32%	23%
	33%	34%	33%	33%	26%

Figure 7 shows the share of payment instrument use for each age cohort. Cash was the third most used instrument behind debit cards and credit cards for all cohorts except those 65 and older. The share of debit and credit card use was roughly similar within each cohort except for the 18 to 24 old cohort.  However, those 18 to 24 years old reported the largest year-over year decline in the share of cash used. This decline corresponds with a significant increase in the share of debit card use between 2019 to 2020. The simultaneous decline in the share of cash use and increase in share of debit card use within this cohort suggests cash payments may have been substituted with debit card payments. This is consistent with the findings from the 2019 Diary where cash-preferring consumers tended to use debit cards as a backup payment instrument at about twice the rate of credit cards. 12

Figure 7 2020 Payment Instrument Use by Age

Age Group	Cash	Credit	Debit	ACH	Check	Other
	20%	21%	51%	3%	0%	5%
	11%	28%	33%	14%	4%	10%
	16%	31%	29%	12%	3%	9%
	17%	25%	33%	13%	4%	8%
	23%	28%	26%	11%	8%	5%
	26%	25%	19%	13%	13%	4%

Section 3. Who is holding cash?

All age and income groups increased cash holdings during the pandemic

As part of each annual Diary, participants are asked to report the amount of cash held in their pocket, purse, or wallet, which is referred to here as on-person cash holdings. These holdings are assumed to be used for payments rather than cash used as a store of value which is typically stored at one’s residence. This year, average on-person cash holdings increased for all adult age groups and household income levels. This a noteworthy shift from the consistent trend of consumers holding approximately $55 since 2016 (Figure 8). 13 As reported in the August supplemental survey paper, the increases in average holdings may be explained by the continued uncertainty regarding the pandemic rather than being highly correlated to economic impact payments and federal supplemental unemployment insurance benefits. 14

Figure 8 Average Daily Holdings by Age

Year	Age 18 to 24	Age 25 to 34	Age 35 to 44	Age 45 to 54	Age 55 to 64	Age 65 and Older	Average
	$23	$30	$42	$50	$67	$88	$51
	$19	$31	$43	$60	$59	$89	$56
	$18	$31	$32	$50	$62	$90	$52
	$33	$30	$38	$44	$60	$97	$54
	$60	$39	$45	$61	$81	$110	$74

Individuals between the ages of 18 to 24, who previously held the least amount of cash on hand, almost doubled their daily holdings, from $33 to $60, since the start of the pandemic. In previous years, this age cohort tended to hold less on-person cash than their older counterparts. While on-person cash holdings increased across all cohorts when compared to 2019, age itself does not explain the increases over 2019. Consumers between 25 and 44 increased their average on-person cash holdings by less than $10 while those 18 to 24 and 55 to 64 increased holdings by $33 and $21, respectively. The pandemic caused the largest increase in the unemployment rate in recent U.S. history, climbing from 3.5 percent in February 2020 to 14.8 percent in April 2020, and left many Americans either furloughed or unemployed. Unemployment benefits from the COVID-19 relief bills are likely the cause for increased on-person holdings across age cohorts (Foster and Greene 2021, Atlanta Fed). 15

Just as with age cohorts, cash held in consumers’ pocket, purse, or wallet increased significantly for households at all income levels. Generally, individuals from higher income households reported holding a greater amount of on-person cash than those from lower income households. Individuals living in households earning between $75,000 and $99,999 increased their on-person holdings to $87, slightly more than those with incomes greater than $125,000 (Figure 9). The cash holdings increased by the smallest increment for individuals in households with incomes between $100,000 and $124,999. 16 This year, the individuals from lower income households, households that most likely had the least amount of savings or cash available elsewhere or for emergency use, reported holding significantly more on-person cash than prior years. It is probable that individuals in this income bracket increased their daily cash holdings as a safety net for emergency use during the pandemic. 17

Figure 9 Average Daily On-Person Holdings by Household Income and Year

Year	Less than $25,000	$25,000 – $49,999	$50,000 – $74,999	$75,000 – $99,999	$100,000 – $124,999	Greater than $125,000
	$33	$46	$56	$50	$69	$86
	$34	$49	$52	$56	$47	$78
	$35	$48	$50	$52	$53	$64
	$37	$49	$58	$52	$53	$67
	$55	$66	$68	$87	$64	$83

Section 4. How has shopping changed during the pandemic?

Number of Not-in-Person Payments Increased Slightly while Payment Values Increased Significantly

When entering transaction details, participants report the amount, merchant type, and payment instrument that was used. They also report whether the payment took place at the merchant location (in person) or not (not-in-person) and if a device such as a landline, mobile phone, tablet, or computer were used in making the payment. For example, a debit card payment at grocery store’s online store using a mobile phone would be considered a not-in-person payment while a debit card payment at the store using a payment app at the card reader while checking out would be an in-person payment. In both instances a mobile device was used to purchase groceries, but it is the specific location that differentiates these payments. While the pandemic changed how many people worked, traveled, and interacted with others, it also changed how and where many purchases for goods and services were made. Between 2016 and 2019 the share of not-in-person, non-bill payments made increased one to two percentage points each year, from 8 percent in 2016 to 13 percent in 2019. 18 However, in 2020, the share of non-bill payments made online increased by more than 50 percent and comprised approximately 20 percent of non-bill payments.

Figure 10 Percent of Non-Bill Payments Made In-Person versus Not-In-Person

Year	In-person	Not-in-person
	92%	8%
	90%	10%
	88%	12%
	87%	13%
	80%	20%

Two factors could be related to the increase in the share of not-in-person, non-bill payments (all payments in this section are referring to non-bill payments) between October 2019 and October 2020. The first factor was the average number of not-in-person payments consumers made each month increased from about four to five payments as people continued to practice social distancing, at least when compared to October 2019. The second factor was consumers made fewer in-person payments with participants reporting 26 non-bill payments in 2020, down from 31 payments in 2019. 19 These two factors resulted in not-in-person, non-bill payments accounting for a larger share of non-bill payments. 20

The aggregate increase of consumers using mobile apps or online marketplaces to make not-in-person, non-bill payment throughout the month took place essentially across four merchant types: grocery and convenience stores, sit-down restaurants and bars, fast food locations and coffee shops, and general merchandise (Figures 11 a-e). These merchant types show the same general pattern: the average number of payments for each merchant type decreased and the average number of not-in-person payments increased. This indicates an increased level of substitution away from in-person toward not-in-person payments.

Figures 11a-e Mean Number of Non-Bill Payments per Person by Merchant Type

Year and Merchant Type	Not-in-person	In-person
	0.2	6.8
	0.4	5.7
	0.0	2.6
	0.2	1.4
	1.6	4.1
	1.9	3.6
	4	27
	5	21

The increase of not-in-person payments, specifically for these merchants, is in line with results from the first supplemental survey in April where people reported increasing online or over the phone payments made at restaurants, grocery stores, and general merchandise stores, even at the start of the pandemic. 21 The change in the number of not-in-person payments for each merchant type is not large. For example, one out of five consumers (an increase of 0.2 monthly payments) made an additional not-in-person payment at a grocery or convenience store and two out of five people (an increase of 0.4 payments) made an additional not-in-person payment at a fast food or coffee shop. On average, the results show that each Diary participant made one additional not-in-person payment in 2020 that would have likely been an in-person payment in 2019 (Figure 11e).

While the average number of not-in-person, non-bill payments made each month increased slightly, the total amount of money spent increased substantially across general merchandise, sit-down restaurants and bars, and grocery and convenience stores (Figure 12). The average amount spent for not-in-person, non-bill payments throughout October increased from $265 in 2019 to $326 in 2020. 22 The increase in average payment values at general merchandise and department stores, sit-down restaurants and bars, and grocery and convenience stores changed considerably with increases ranging between $14 to $19. 23 The increases in the average number payments and the average payment values made at these merchant types not only show that consumers increased not-in-person spending, but were also willing expand the types of goods and services purchased online when conducting not-in-person payments. For example, paying online for dine-in service at a restaurant before the pandemic was practically non-existent, as seen in the 2019 Diary data (Figure 11c). While uncommon, consumers did make not-in-person payments at fast food locations and coffee shops in 2019. But as demand for take-out from traditional dine-in restaurants increased, both the need and supply of not-in-person payment options increased, making it more likely consumers would use these payments at a wider range of restaurants and for a wider range of payment values. These changes do not suggest that these changes will be permanent after the pandemic. Instead, it proposes that the trends and changes in the payments system will be an area of continual research.

Figure 12 Mean Value per Payment for Not-In-Person, Non-Bills for Select Merchant Types

Year	General Merchandise and Department Stores	Grocery and convenience stores	Sit-down restaurants and bars	Fast food and coffee shops
	$52	$56	$26	$17
	$73	$73	$40	$22

As expected, the 2021 Diary findings were quite different from prior years. The COVID-19 pandemic resulted in consumers reducing their total payments, mostly driven by a reduction in the number of in-person payments, which account for approximately 80 percent of all payments. While consumers continued to use cash for nearly 20 percent of all payments, the increase in consumers’ online shopping reduced opportunities to use cash. Despite a decline in cash use, consumers of all age and income groups were storing more cash elsewhere or holding more cash in their pocket, purse, or wallet, presumably as an instrument for emergency use.

In the future it will be interesting to see whether the changes in payment trends discussed in this paper are temporary or whether the pandemic acted as catalyst, accelerating trends already in motion. Consumers have historically held more currency during uncertain times and this pandemic is no different. 24 As economic conditions evolve to a post-pandemic state, consumers may decide to hold elevated levels of cash as they continue to shift more and more payments to online platforms. Or perhaps the return to in-person shopping may bring a sense of normalcy and with it an increase in cash use for small-value payments, such as morning coffee, a quick run to the grocery store, or a drink with friends after work. Regardless of how the payments landscape evolves, it is important to note that consumers continue to use cash, though at a lower rate, even amid a pandemic.

Diary of Consumer Payment Choice

The Federal Reserve’s national Cash Product Office (CPO) uses data from the Diary of Consumer Payment Choice (Diary) to understand consumer cash use and anticipate its ongoing role in the payments landscape. Developed by the Federal Reserve Bank of Boston’s Consumer Payment Research Center (CPRC) and currently managed by the Research Department at the Federal Reserve Bank of Atlanta, the Diary collects data about shopping and payments behavior from a unique, nationally representative survey of consumers administered by the University of Southern California (USC) Dornsife Center for Economic and Social Research. USC’s Understanding America Study panel of households comprises approximately 9,000 respondents from across the United States, 1,537 of which completed the 2020 Diary of Consumer Payment Choice.

By tracking consumer payment transactions and preferences during the month of October every year, the CPO compares cash with other payment instruments, such as debit and credit cards, checks, and electronic options. Diary participants also report the amount of cash on-hand after each survey day, cash stored elsewhere, and cash deposits or withdrawals conducted during their three-day reporting period. The CPO analyzes the Diary data, including the impact of age and income on an individual’s payment behavior and preferences. This detail of the stock and flow of cash at an individual level provides insight into how consumers use cash.

To ensure a nationally representative sample, responses are weighted to match national population estimates based on the Census Bureau’s Current Population Survey. The Diary is administered throughout the month of October, which was selected as a “typical month” to minimize seasonality effects in consumer spending patterns. Participants were each assigned a three-day period within the month, with some individuals assigned a starting date in late September and others assigned to finish in early November. For a more detailed description of the Diary of Consumer Payment Choice, see Angrisani, Foster, and Hitczenko (2017b); Angrisani, Foster, and Hitczenko (2018); Greene, Schuh, and Stavins (2018); Greene and Schuh (2017); Greene, O’Brien, and Schuh (2017); and Schuh (2017).

About the Cash Product Office

As the nation’s central bank, the Federal Reserve ensures that cash is available when and where it is needed, including in times of crisis and business disruption, by providing FedCash® Services to depository institutions and, through them, to the general public. In fulfilling this role, the Fed’s primary responsibility is to maintain public confidence in the integrity and availability of U.S. currency.

The Federal Reserve System’s Cash Product Office (CPO) provides strategic leadership for this key function by formulating and implementing service level policies, operational guidance, and technology strategies for U.S. currency and coin services provided by Federal Reserve Banks nationally and internationally. In addition to guiding policies and procedures, the CPO establishes budget guidance for FedCash® Services, provides support for Federal Reserve currency and coin inventory management, and supports business continuity planning at the supply chain level. It also conducts market research and works with financial institutions and retailers to analyze trends in cash usage.

Angrisani, Marco, Kevin Foster, and Marcin Hitczenko. 2017b. “The 2012 Diary of Consumer Payment Choice: Technical Appendix.” Federal Reserve Bank of Boston Research Data Reports No. 17-5.

Angrisani, Marco, Kevin Foster, and Marcin Hitczenko. 2018. “The 2015 and 2016 Diaries of Consumer Payment Choice: Technical Appendix.” Federal Reserve Bank of Boston Research Data Reports No. 18-2.

Foster, K. and Claire Greene. 2021. “Consumer Behavior in a Health Crisis: What Happened with Cash?”.  Policy Hub ,  1 , pp.17-39.

Greene, Claire, and Scott D. Schuh. 2017. “The 2016 Diary of Consumer Payment Choice.” Federal Reserve Bank of Boston Research Data Reports No. 17-7.

Greene, Claire, Shaun O’Brien, and Scott Schuh. 2017. “U.S. Consumer Cash Use, 2012–2015:  An Introduction to the Diary of Consumer Payment Choice.” Federal Reserve Bank of Boston Research Data Reports No. 17-6.

Greene, Claire, Scott D. Schuh, and Joanna Stavins. 2018. “The 2012 Diary of Consumer Payment Choice: Summary Results.” Federal Reserve Bank of Boston Research Data Reports No. 18-1.

Kim, Laura, Raynil Kumar, and Shaun O’Brien. 2020. “2020 Findings from the Diary of Consumer Payment Choice.”  Cash Product Office, Federal Reserve System, July.

Kim, Laura, Raynil Kumar, and Shaun O’Brien. 2020. “Consumer Payments & the COVID-19 Pandemic: A Supplement to the 2020 Findings from the Diary of Consumer Payment Choice.”  Cash Product Office, Federal Reserve System, July. 

Coyle, K., Laura Kim. and Shaun O’Brien. 2021. “Consumer Payments and the COVID-19 Pandemic: The Second Supplement to the 2020 Findings from the Diary of Consumer Payment Choice .” Cash Product Office, Federal Reserve System, July.

Schuh, Scott. 2017. “Measuring Consumer Expenditures with Payment Diaries.” Federal Reserve Bank of Boston Research Department Working Papers No. 17-2.

1. The Diary of Consumer Payment Choice has been conducted annually since 2016. Prior to 2016, two Diary studies took place with the first in using RAND’s American Life panel in October 2012 and the second conducted between mid-October and mid-December 2015 using Understanding America Study panel. Given the different panels from which participants are asked to participate and the different timeframe of these early Diary studies, this paper uses data starting with the 2016 Diary.

2. Additional information regarding the Understanding America Study panel, COVID-19 surveys and data can be found at the University of Southern California Dornsife Center for Economic and Social Research website  Understanding America Study (usc.edu)

3. The two supplemental Diary papers can be found at: Consumer Payments and the COVID-19 Pandemic: A Supplement to the 2020 Findings from the Diary of Consumer Payment Choice and Consumer Payments and the COVID-19 Pandemic: The Second Supplement to the 2020 Findings from the Diary of Consumer Payment Choice

4. The 2019 and 2020 Diary were conducted over 3-day periods while the supplemental surveys in April and August 2020 asked participants to recall in-person payments ranging between 30 and 60 days. While this is not a direct comparison, the April and August survey showed that people conducted less in-person payments despite having a longer data collection period than the Diary. 

5. Refer to the Federal Reserve Bank of Atlanta Diary of Consumer Payment Choice webpage for the most recent publication.

6. This difference is statistically significant for a two tailed test at the 90 percent level.

7. In addition to the annual Diary study, the Federal Reserve conducted two supplemental surveys in April and August of 2020 which were designed to assess the impact of the pandemic on shopping behavior, cash holdings, cash avoidance, and consumers’ experiences with coin. The April supplemental survey asked individuals if they had made any in-person payments since March 10 th , which was just before the declaration of a national emergency. The August supplemental survey asked participants whether they had made any in-person payments over the last 30 days.

8. The data collection for the 2020 Diary was conducted prior to the peak in COVID-19 cases across the United States which took place during Thanksgiving in November.

9. Refer to the “ 2020 Findings from the Diary of Consumer Payment Choice ” for details.

10. The share of payments indicates shares by number not by share of dollar value of payments. “Other” payments include bank account number payments, online banking bill pay, prepaid card, money orders, traveler’s checks, account-to-account transfers, and direct deduction from income.

11. In the April survey, 7 percent of the in-person payees reported that merchants refused cash.

12. Refer to the “ 2020 Findings from the Diary of Consumer Payment Choice ” for details.

13. The results reported in this section exclude the top 1 percent of on-person cash holdings. The decision to truncate the data this year rather than in previous years was to reduce the effect of outliers in 2020, which were more prominent than in previous Diary studies. As a result, comparisons to the same data reported in previous paper will differ slightly. The differences in holdings for those between 45 and 64 were statistically significant at the 95 percent level and those under 25 were statistically significant at the 90 percent level.

14. The 2020 Supplemental Survey concluded that the data cannot conclusively determine how strongly the changes in cash holdings were driven by Economic Impact Payments (EIPs) or uncertainty around the pandemic. If EIPs were a key driver in respondents increasing cash holdings, the continued uncertainty regarding the pandemic may explain why respondents continue to hold an increased amount of store of value cash. Please refer to the “ Consumer Payments and the COVID-19 Pandemic: The Second Supplement to the 2020 Findings from the Diary of Consumer Payment Choice ” for more details.

15. Please refer to Consumer Behavior in a Health Crisis: What Happened with Cash? for more details.

16. The differences in on-person cash holdings were statistically significant at the 95 percent confidence internal for all income groups except those in households earnings $50,000 to $74,999 and $100,000 to $125,000.

17. This section of the Diary is interested in changes in the amount of cash that is being held for payments. Therefore, the discussion of cash held is focused on cash held throughout the day rather than cash stored elsewhere.

18. Not-in-person payments refers to payments not made at the merchant location and generally a device is used to complete the payment. Examples of a device that could be used are one’s mobile phone, tablet, computer, watch landline, or mail.

19. The number of total payments also decreased in 2020 compared to 2019. However, as bill payments in previous Diary studies show a higher share of not-in-person payments when compared to non-bill payments, the focus here is to show that traditionally non-bill payments shifted from in-person to not-in-person during the pandemic, even in sectors of the economy where the share of in-person payments remained high.

20. If not-in-person, non-bill payments were unchanged between 2019 and 2020, they would have accounted for 4 out of 26 non-bill payments, or 15 percent, rather than 4 out of 31, or 13 percent as was the case in 2019.

21. The two previous supplemental Diary papers can be found at: Consumer Payments and the COVID-19 Pandemic: A Supplement to the 2020 Findings from the Diary of Consumer Payment Choice and Consumer Payments and the COVID-19 Pandemic: The Second Supplement to the 2020 Findings from the Diary of Consumer Payment Choice

22. This average per-person difference was not statistically significant, though the average transaction values for the merchant types shown in Figure 14 are statistically significant at the alpha = 0.10 level.

23. Observations with a payment value in the top one percent for each merchant type were not included to reduce the effect large payment values may have on average values.

24. The value of currency in circulation (CIC) increased by more than $75 billion between March 4 th 2020 and April 8 th 2020 following the declaration of a national emergency. For comparison, the CIC increased by approximately $80 billion throughout all of 2019. The CIC data can be found at Currency in Circulation: Week Average St. Louis Fed

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View Full Report of the 2024 Diary of Consumer Payment Choice (PDF)

In May, Federal Reserve Financial Services’ FedCash ® Services released the annual Diary of Consumer Payment Choice (PDF) report from its ongoing research into the payment habits of the U.S. population. The 2024 findings revealed consumers made more payments in 2023 than in previous years, continuing the trend of rising payment transactions since 2020.

Amid increased payments, cash’s share decreased in favor of credit and debit cards, but overall cash use has remained stable as consumers continued to hold more cash than they did before 2020 as both a store-of-value (up 53%) and in their pockets, purses or wallets as a backup payment instrument (up 23%).

The findings also show a growing generational divide among those using cash versus electronic payments. Consumers younger than age 55 used cash for just 12% of payments in 2023, compared to 22% for those age 55 and older. Notably, for the first time in Diary history, cash was not the most-used instrument for smaller-value payments of $25 or less.

Other key findings from this nationally representative survey include:

• Consumers made an average of 46 monthly payments in 2023, an increase of seven payments compared to 2022.
• Increased credit and debit card use between 2022 and 2023 resulted in more than 60% of payments per month being made with credit (32%) and debit cards (30%).

• The share of payments made with cash decreased to 16%, though it remained the third most-used payment instrument behind credit and debit cards.
• Cash use was driven by in-person shopping, as well as by the payment behavior of consumers in low-income households and individuals age 55 and older.
• Individuals age 55 and older relied on cash for 22% of their payments, a rate approximately 1.5 times higher than that of their younger counterparts under 55.

• Consumers used mobile apps for 50% of person-to-person payments, continuing a widespread consumer transition away from paper-based payments.
• More than 90% of consumers intend to use cash as either a means of payment or store of value in the future.

Since 2016, the Federal Reserve has conducted this annual consumer survey to better understand the payment habits of U.S. consumers. Participants report all payments over a three-day period, the value of their cash holdings, payment instruments used and their preferences for various types of payments.

• Download the full report (PDF)
• Download the 2024 Diary of Consumer Payment Choice chart data (XLSX)

About the Diary of Consumer Payment Choice

The Federal Reserve conducts the Diary of Consumer Payment Choice survey every year to understand U.S. consumers’ payment behavior, preferences and how consumer payments change from one year to the next. The latest survey was conducted in October 2023. Understanding the evolving role of cash in the U.S. economy through the Diary studies helps ensure FedCash Services is fulfilling its mission of meeting cash demand in times of both normalcy and stress, maintaining the public’s confidence in U.S. currency, and providing ready access to cash.

Federal Reserve Financial Services uses data from the Diary to understand consumer cash use and anticipate its ongoing role in the payments landscape. By tracking consumer payment transactions and preferences annually during the month of October, Federal Reserve Financial Services compares cash with other payment instruments, such as credit and debit cards, checks and electronic payment options. Diary participants also report the amount of cash on hand after each survey day, cash stored elsewhere and cash deposits or withdrawals. Analysis of the Diary data includes the impact of age and income on an individual’s payment behavior and preferences, as well as cash stocks and flows at an individual level.

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• Payment Trends
• PAYMENTS are eating THE WORLD

The potential for the digital economy is virtually limitless

[MUSIC PLAYING]

Back in 2010, the fastest way to get money on the same day from New York to London was to fly it there yourself. Now payments can be made securely in seconds, to anywhere in the world at virtually no cost. Innovation in payments happens fast. J.P Morgan's POWER+ framework captures five mega themes, that are driving the payment revolution. Platforms, online, wallets, embedded, real time plus value added services.

With payments becoming the new connective tissue of the world, the next decade for payments promises to be even more transformational than the last. It promises to connect the physical and digital economies. And more payments from being the last stop at checkout to a new growth driver for businesses, which is why we believe payments are eating the world. So what's next for your business?

Rapid digitization across the globe is transforming all aspects of our lives, and payments are the most crucial element. From online marketplaces and streaming videos to cross-border money transfers, almost every digital activity relies on a payment system.

J.P. Morgan’s proprietary POWER+ framework outlines five mega-themes that are shaping the future of payments. These mega-themes account for about $54 trillion in global payment flows—and it will only continue to grow. 1

This is why we say that payments are eating the world.

Payments mega-themes amount to $54 trillion 1

$36 T in global payment volumes

Digital platforms and e-commerce marketplaces are continuing to expand and coalesce. Also known as super apps, these large-scale ecosystems offer a huge array of products, services and financial solutions. Embedded payments are a central component of super apps, because they enable customers to transact without leaving the platform. Platforms currently account for $36 trillion in global payment volumes. 1

$6.8 T in global payment volumes

The online economy is not just transforming how we shop but also how we work and even who we are. The combination of e-commerce, digital identity solutions as well as the growing gig and creator economies accounts for $6.8 trillion in global payment volumes. 1

$4.4 T in global payment volumes

Cryptocurrencies, stablecoins and tokens are just some of the new forms of digital currency that have emerged over the past few years. This has necessitated the creation of digital wallets that sit outside of traditional banks and allow people to store value, transfer funds and make purchases using digital payment rails. Wallets account for $4.4 trillion in global payment volumes. 1

$1.1 T in global payment volumes

Embedded payment solutions add a new layer of convenience to the shopping experience and demonstrate how financial services can seamlessly integrate into everyday activities. Connected devices, like wearables, cars and household appliances, can all be used to make instant, contextual and contactless payments. Embedded payments account for $1.1 trillion in global payment volumes. 1

$5.3 T in global payment volumes

The demand for convenient, secure and instantaneous payments is increasing, whether it’s a customer making an e-commerce purchase, or a worker sending money to their home country. Real-time transactions account for $5.3 trillion in global payment volumes. 1

It’s no surprise that payments is a business open to great disruption by fintech companies. Traditional payment systems were built long ago and customer expectations have evolved quickly and dramatically along with the technological advancements we’ve experienced in our personal lives.  

Jamie Dimon

Chairman and Chief Executive Officer, JPMorgan Chase & Co.

The payments revolution

Download the POWER+ report

The next decade of payments promises to be even more transformational than the last, and the major trends outlined in the POWER+ framework will play an increasingly important role. Payments will fuel innovation, while innovation will push payments beyond a purchasing function into a role that connects our physical and digital societies.

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J.P. Morgan proprietary research and analysis, as of October 2021.

This material was prepared exclusively for the benefit and internal use of the JPMorgan client to whom it is directly addressed (including such client’s subsidiaries, the “Company”) in order to assist the Company in evaluating a possible transaction(s) and does not carry any right of disclosure to any other party. In preparing this material, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us by or on behalf of the Company or which was otherwise reviewed by us. This material is for discussion purposes only and is incomplete without reference to the other briefings provided by JPMorgan. Neither this material nor any of its contents may be disclosed or used for any other purpose without the prior written consent of JPMorgan. J.P. Morgan, JPMorgan, JPMorgan Chase and Chase are marketing names for certain businesses of JPMorgan Chase & Co. and its subsidiaries worldwide (collectively, “JPMC”). Products or services may be marketed and/or provided by commercial banks such as JPMorgan Chase Bank, N.A., securities or other non-banking affiliates or other JPMC entities. JPMC contact persons may be employees or officers of any of the foregoing entities and the terms “J.P. Morgan”, “JPMorgan”, “JPMorgan Chase” and “Chase” if and as used herein include as applicable all such employees or officers and/or entities irrespective of marketing name(s) used. Nothing in this material is a solicitation by JPMC of any product or service which would be unlawful under applicable laws or regulations. Investments or strategies discussed herein may not be suitable for all investors. Neither JPMorgan nor any of its directors, officers, employees or agents shall incur in any responsibility or liability whatsoever to the Company or any other party with respect to the contents of any matters referred herein, or discussed as a result of, this material. This material is not intended to provide, and should not be relied on for, accounting, legal or tax advice or investment recommendations. Please consult your own tax, legal, accounting or investment advisor concerning such matters. Not all products and services are available in all geographic areas. Eligibility for particular products and services is subject to final determination by JPMC and or its affiliates. This material does not constitute a commitment by any JPMC entity to extend or arrange credit or to provide any other products or services and JPMorgan reserves the right to withdraw at any time. All services are subject to applicable laws, regulations, and applicable approvals and notifications. The Company should examine the specific restrictions and limitations under the laws of its own jurisdiction that may be applicable to the Company due to its nature or to the products and services referred herein. Notwithstanding anything to the contrary, the statements in this material are not intended to be legally binding. Any products, services, terms or other matters described herein (other than in respect of confidentiality) are subject to, and superseded by, the terms of separate legally binding documentation and/or are subject to change without notice. Changes to Interbank Offered Rates (IBORs) and other benchmark rates: Certain interest rate benchmarks are, or may in the future become, subject to ongoing international, national and other regulatory guidance, reform and proposals for reform. For more information, please consult:  https://www.jpmorgan.com/global/disclosures/interbank_offered_rates . JPMorgan Chase Bank, N.A. Member FDIC. JPMorgan Chase Bank, N.A., organized under the laws of U.S.A. with limited liability.

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Research department working papers, payments evolution from paper to electronic: bill payments and purchases.

Evidence shows that US consumers’ use of checks has declined sharply over time. They wrote 19.3 billion checks in 2000 and only 7.1 billion in 2018—a 63 percent drop—according to the Federal Reserve Payments Study. However, the literature contains little analysis of how changes in check use for bill payments and purchases relate to each other. This paper uses data from the Survey of Consumer Payment Choice to track individual respondents over a nine-year period and determine whether consumers tend to reduce their check use for bills and then reduce it for purchases, or vice versa.

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Navigating the payments matrix

Payments 2025 & beyond

• 10 minute read
• May 07, 2021

Charting a course amid evolution and revolution

The financial services industry is in the midst of a significant transformation, accelerated by the COVID-19 pandemic. And given the key role digitisation plays in the financial lives of more and more of the world’s population, electronic payments are at the epicentre of this transformation.

Payments are becoming increasingly cashless, and the industry’s role in fostering inclusion has become a significant priority. Payments also are supporting the development of digital economies and are driving innovation — all while functioning as a stable backbone for our economies. 

We are therefore delighted that the first report we are launching in our 2025 & Beyond series focuses on the payments industry and the key themes that are influencing it. How the industry responds to these trends will define how successful it is in the coming years and its impact on society overall.

Payments data at a glance

42% increase in global cashless payment volumes, 90% of banks' useful customer data comes from payments, 86% agreed that traditional payments providers will collaborate with fintechs and technology providers as one of their main sources of innovation -->, 89% agreed that the shift towards e-commerce would continue to increase.

42% felt strongly that there would be an acceleration of cross-border, cross-currency instant and B2B payments

Thinking about the different areas that could potentially be impacted by regulatory changes over the next 5 years, which areas of regulation are you most concerned about? Which of the following factors will have the greatest impact in shaping your cybersecurity strategy over the next 5 years? Is your organisation likely to consider any Merger & Acquisition (M&A), Divestitures or Carve-out activity in the next 5 years? To what extent do you expect ESG (Environmental, Social and Corporate Governance) to influence the following aspects of your organisation's business model? The role of employees in Financial Services organisations is changing. Which of the following activities is your organisation planning topursue over the next 5 years to address a potential future skills gap? Thinking about macro trends in the financial services industry, which of the statements below do you think is most likely to be true in the 2025? And finally, thinking ahead to 2025,what do you expect to be your organisation's top 3 challenges over the next 5 years in the order of priority for your organisation? - Ranked 1-3

All Sectors

Questions and Answers	Global	Asia Pac	EMEA	Americas
Data shown:
AML (Anti Money Laundering)	24%	23%	22%	27%
Use of new technology	30%	33%	23%	32%
Enhanced accountability	23%	27%	21%	19%
Open Banking	22%	23%	22%	22%
Central Bank Digital Currency (CBDC)	27%	33%	25%	21%
Data privacy and cybersecurity	48%	40%	50%	57%
Environment and climate (e.g. ESG)	28%	36%	26%	20%
Customer communication	25%	28%	19%	26%
Digital identity authentication	31%	34%	26%	31%
E-money/Cryptocurrency	27%	28%	25%	26%
KYC (Know Your Customer)	28%	31%	26%	27%
Local regulatory pressures - different regulations in different regions	30%	35%	28%	26%
New business model (crowdfunding, peer-to-peer lending)	26%	35%	22%	18%
Other (please specify)	0%	0%	0%	1%
Don't know	2%	1%	3%	2%
Data shown:
Shortage of cybersecurity talent	35%	37%	36%	32%
Introduction of new authentication technologies, such as biometrics	30%	33%	25%	29%
Increasing complexity of cyber threats	45%	42%	42%	51%
Introduction of fifth-generation (5G) cellular networks	29%	38%	23%	24%
Adoption of Internet of Things (IoT) hardware and software	30%	40%	20%	26%
Growing public concern over data privacy	35%	34%	36%	36%
Cybersecurity and data privacy regulations	46%	46%	47%	46%
Vulnerabilities in supply chains and business partners	28%	26%	25%	33%
Rising geopolitical tensions	28%	30%	27%	28%
Human vulnerabilities (unintentional or malicious)	32%	29%	33%	35%
Other (please specify)	0%	0%	0%	0%
Don't know	2%	2%	3%	2%
Data shown:
Yes - expect 1 or 2 M&A/Divestitures/Carve-out activities	25%	22%	23%	29%
Yes - expect 3 to 5 M&A/Divestitures/Carve-out activities	32%	40%	31%	24%
Yes - expect more than 5 M&A/Divestitures/Carve-out activities	13%	13%	11%	13%
No - we don't plan to consider any M&A/Divestitures/Carve-out activities expected within next 5 years	18%	15%	23%	18%
No - but we expect to be the target of an M&A/ ivestiture/Carve-out activity expected within next 5 years	4%	5%	4%	4%
Don't know	8%	5%	8%	11%
Data shown: separated by commas in each table cell.
Selection of clients	21%,43%,34%,3%	13%,47%,38%,3%	20%,42%,35%,3%	30%,38%,29%,3%
Selection of suppliers (value chain partners)	17%,46%,34%,3%	13%,45%,40%,2%	17%,49%,31%,3%	21%,44%,31%,4%
Products/service offering	13%,45%,39%,3%	10%,48%,40%,2%	11%,44%,41%,4%	18%,44%,36%,2%
Investment decisions	14%,41%,41%,3%	13%,40%,46%,2%	13%,41%,42%,4%	17%,43%,36%,4%
Lending decisions	19%,43%,35%,4%	18%,44%,33%,4%	13%,41%,42%,4%	24%,38%,33%,5%
Recruitment of employees	22%,43%,33%,3%	17%,50%,32%,1%	24%,37%,35%,4%	26%,38%,32%,4%
Overall organisation's strategy	12%,43%,42%,3%	10%,44%,44%,2%	14%,40%,41%,5%	14%,44%,39%,3%
Data shown:
Change the composition of the workforce between permanent and contingent staff	35%	40%	33%	31%
Hire from competitors	30%	28%	33%	30%
Acquire a firm to access new skills/expertise	34%	43%	26%	29%
Establish a strong pipeline direct from education	40%	45%	30%	43%
Hire from outside the industry	29%	31%	28%	28%
Undertake significant retraining/upskilling	47%	47%	44%	49%
Outsource non-core activities to third parties	36%	41%	29%	36%
Other (please specify)	0%	0%	0%	0%
Don't know	4%	3%	6%	4%
Data shown for Trend 1:
Data shown for Trend 2:
Data shown for Trend 3:
Data shown for Trend 4:
Data shown for Trend 5:
Data shown for Trend 6:
Data shown for Trend 7:
Trend 1: Interest rates	62%,30%,7%	68%,26%,6%	57%,34%,9%	60%,33%,7%
Trend 2: Alternative finance	53%,38%,9%	62%,31%,8%	46%,43%,11%	46%,43%,11%
Trend 3: Sources of capital	56%,32%,12%	65%,26%,9%	49%,36%,15%	50%,38%,13%
Trend 4: Regulatory initiatives	47%,41%,12%	48%,44%,7%	46%,35%,18%	46%,41%,13%
Trend 5: Globalisation	34%,48%,17%	40%,52%,8%	29%,43%,28%	32%,48%,20%
Trend 6: Digital v Bricks & Mortar	68%,22%,10%	67%,25%,8%	66%,20%,14%	70%,21%,8%
Trend 7: Big tech in FS	61%,30%,8%	63%,31%,6%	57%,31%,11%	63%,29%,8%
Data shown:
New and digital only market entrants	14%	13%	15%	14%
Inadequacy of basic infrastructure	8%	11%	6%	6%
Increasing frequency of cyber threats	19%	18%	21%	19%
Regulatory compliance	20%	16%	21%	24%
Investor demands	12%	12%	13%	10%
Low or zero interest rate environment	17%	18%	17%	17%
Increasing inequality	9%	12%	9%	7%
Geopolitical uncertainty	15%	13%	17%	15%
Climate change and environmental issues e.g. ESG	15%	18%	13%	13%
Crisis response preparedness	14%	15%	15%	13%
Customers loss of trust in their financial institutions	13%	16%	15%	9%
Attracting and retaining talented employees	17%	18%	17%	14%
Attracting new customers	19%	20%	19%	19%
Retaining existing customers	15%	14%	16%	14%
Increasing profitability of customers	16%	16%	15%	18%
Impact of new technologies	21%	20%	16%	26%
Product development	11%	12%	10%	11%
Pressure on Fees	15%	13%	18%	15%
Other (please specify)	0%	0%	0%	0%
Digital transformation	22%	19%	23%	26%
Don't know	1%	1%	1%	1%

Thinking about the different areas that could potentially be impacted by regulatory changes over the next 5 years, which areas of regulation are you most concerned about? Which of the following factors will have the greatest impact in shaping your cybersecurity strategy over the next 5 years? Is your organisation likely to consider any Merger & Acquisition (M&A), Divestitures or Carve-out activity in the next 5 years? To what extent do you expect ESG (Environmental, Social and Corporate Governance) to influence the following aspects of your organisation's business model? The role of employees in Financial Services organisations is changing. Which of the following activities is your organisation planning topursue over the next 5 years to address a potential future skills gap? Thinking about macro trends in the financial services industry, which of the statements below do you think is most likely to be true in the 2025? And finally, thinking ahead to 2025,what do you expect to be your organisation’s top 3 challenges over the next 5 years in the order of priority for your organisation? - Ranked 1-3

AWM

Questions and Answers	Global	Asia Pac	EMEA	Americas
Data shown:
AML (Anti Money Laundering)	25%	26%	29%	22%
Use of new technology	31%	33%	27%	32%
Enhanced accountability	19%	24%	20%	13%
Open Banking	22%	26%	20%	16%
Central Bank Digital Currency (CBDC)	25%	30%	31%	15%
Data privacy and cybersecurity	51%	41%	47%	66%
Environment and climate (e.g. ESG)	32%	34%	37%	25%
Customer communication	21%	24%	14%	23%
Digital identity authentication	31%	35%	22%	32%
E-money/Cryptocurrency	26%	30%	27%	20%
KYC (Know Your Customer)	29%	36%	18%	25%
Local regulatory pressures - different regulations in different regions	33%	41%	29%	25%
New business model (crowdfunding, peer-to-peer lending)	24%	34%	16%	16%
Other (please specify)	1%	0%	0%	3%
Don't know	3%	0%	8%	4%
Data shown:
Shortage of cybersecurity talent	33%	42%	22%	27%
Introduction of new authentication technologies, such as biometrics	23%	28%	14%	22%
Increasing complexity of cyber threats	47%	41%	41%	59%
Introduction of fifth-generation (5G) cellular networks	27%	36%	20%	20%
Adoption of Internet of Things (IoT) hardware and software	32%	49%	14%	20%
Growing public concern over data privacy	36%	38%	24%	39%
Cybersecurity and data privacy regulations	48%	51%	47%	46%
Vulnerabilities in supply chains and business partners	31%	30%	27%	35%
Rising geopolitical tensions	33%	34%	31%	34%
Human vulnerabilities (unintentional or malicious)	30%	25%	35%	33%
Other (please specify)	0%	0%	0%	1%
Don't know	1%	1%	4%	0%
Data shown:
Yes - expect 1 or 2 M&A/Divestitures/Carve-out activities	31%	23%	14%	27%
Yes - expect 3 to 5 M&A/Divestitures/Carve-out activities	22%	38%	33%	20%
Yes - expect more than 5 M&A/Divestitures/Carve-out activities	22%	9%	8%	11%
No - we don't plan to consider any M&A/Divestitures/Carve-out activities expected within next 5 years	10%	23%	24%	19%
No - but we expect to be the target of an M&A/ Divestiture/Carve-out activity expected within next 5 years	4%	5%	4%	4%
Don't know	11%	3%	16%	19%
Data shown: separated by commas in each table cell.
Selection of clients	21%,43%,33%,2%	9%,49%,39%,3%	22%,45%,31%,2%	37%,34%,28%,1%
Selection of suppliers (value chain partners)	15%,46%,35%,5%	6%,43%,49%,2%	16%,53%,24%,6%	25%,44%,23%,8%
Products/service offering	13%,43%,41%,3%	5%,51%,43%,1%	10%,35%,49%,6%	24%,39%,33%,4%
Investment decisions	12%,42%,43%,3%	5%,44%,50%,1%	10%,41%,45%,4%	23%,41%,33%,4%
Lending decisions	21%,43%,30%,5%	12%,49%,36%,3%	16%,49%,31%,4%	37%,33%,23%,8%
Recruitment of employees	19%,46%,32%,3%	10%,53%,35%,2%	27%,45%,24%,4%	27%,37%,32%,5%
Overall organisation's strategy	13%,44%,40%,2%	7%,44%,48%,1%	14%,47%,39%,0%	22%,43%,32%,4%
Data shown:
Change the composition of the workforce between permanent and contingent staff	40%	44%	35%	37%
Hire from competitors	27%	26%	24%	28%
Acquire a firm to access new skills/expertise	31%	45%	22%	18%
Establish a strong pipeline direct from education	45%	49%	24%	52%
Hire from outside the industry	27%	30%	16%	30%
Undertake significant retraining/upskilling	46%	45%	37%	52%
Outsource non-core activities to third parties	37%	40%	29%	37%
Other (please specify)	0%	0%	0%	0%
Don't know	6%	4%	12%	4%
Data shown for Trend 1:
Data shown for Trend 2:
Data shown for Trend 3:
Data shown for Trend 4:
Data shown for Trend 5:
Data shown for Trend 6:
Data shown for Trend 7:
Trend 1: Interest rates	63%,31%,6%	68%,29%,3%	59%,33%,8%	59%,33%,8%
Trend 2: Alternative finance	53%,38%,8%	67%,30%,3%	45%,47%,8%	42%,43%,15%
Trend 3: Sources of capital	60%,30%,10%	68%,28%,4%	51%,33%,16%	56%,29%,15%
Trend 4: Regulatory initiatives	49%,37%,15%	56%,38%,6%	45%,33%,22%	42%,37%,22%
Trend 5: Globalisation	29%,53%,18%	38%,54%,8%	14%,51%,35%	25%,53%,22%
Trend 6: Digital v Bricks & Mortar	69%,21%,10%	72%,24%,5%	69%,16%,14%	66%,22%,13%
Trend 7: Big tech in FS	59%,33%,9%	58%,37%,5%	53%,37%,10%	63%,24%,13%
Data shown:
New and digital only market entrants	11%	10%	12%	11%
Inadequacy of basic infrastructure	6%	6%	6%	5%
Increasing frequency of cyber threats	24%	22%	27%	25%
Regulatory compliance	24%	23%	22%	27%
Investor demands	15%	15%	16%	14%
Low or zero interest rate environment	14%	11%	16%	16%
Increasing inequality	6%	9%	2%	5%
Geopolitical uncertainty	21%	11%	22%	6%
Climate change and environmental issues e.g. ESG	13%	15%	8%	14%
Crisis response preparedness	17%	18%	22%	14%
Customers loss of trust in their financial institutions	11%	15%	10%	8%
Attracting and retaining talented employees	15%	18%	12%	14%
Attracting new customers	15%	21%	18%	6%
Retaining existing customers	12%	18%	22%	24%
Increasing profitability of customers	18%	20%	20%	15%
Impact of new technologies	25%	25%	14%	32%
Product development	10%	12%	10%	9%
Pressure on Fees	16%	13%	20%	16%
Other (please specify)	0%	0%	0%	1%
Digital transformation	22%	18%	16%	30%
Don't know	0%	0%	0%	1%

Thinking about the different areas that could potentially be impacted by regulatory changes over the next 5 years, which areas of regulation are you most concerned about? Which of the following factors will have the greatest impact in shaping your cybersecurity strategy over the next 5 years? Is your organisation likely to consider any Merger & Acquisition (M&A), Divestitures or Carve-out activity in the next 5 years? To what extent do you expect ESG (Environmental, Social and Corporate Governance) to influence the following aspects of your organisation's business model? The role of employees in Financial Services organisations is changing. Which of the following activities is your organisation planning topursue over the next 5 years to address a potential future skills gap? Thinking about macro trends in the financial services industry, which of the statements below do you think is most likely to be true in the 2025? And finally, thinking ahead to 2025,what do you expect to be your organisation’s top 3 challenges over the next 5 years in the order of priority for your organisation? - Ranked 1-3

Banking

Questions and Answers	Global	Asia Pac	EMEA	Americas
Data shown:
AML (Anti Money Laundering)	26%	23%	24%	30%
Use of new technology	27%	26%	19%	34%
Enhanced accountability	26%	29%	22%	27%
Open Banking	27%	23%	29%	30%
Central Bank Digital Currency (CBDC)	31%	35%	26%	31%
Data privacy and cybersecurity	43%	31%	52%	46%
Environment and climate (e.g. ESG)	26%	33%	28%	19%
Customer communication	24%	27%	19%	26%
Digital identity authentication	31%	33%	30%	31%
E-money/Cryptocurrency	32%	32%	32%	32%
KYC (Know Your Customer)	30%	30%	28%	31%
Local regulatory pressures - different regulations in different regions	24%	23%	27%	23%
New business model (crowdfunding, peer-to-peer lending)	25%	24%	27%	23%
Other (please specify)	0%	0%	1%	0%
Don't know	1%	0%	0%	2%
Data shown:
Shortage of cybersecurity talent	36%	34%	39%	35%
Introduction of new authentication technologies, such as biometrics	26%	20%	26%	32%
Increasing complexity of cyber threats	45%	45%	38%	50%
Introduction of fifth-generation (5G) cellular networks	30%	38%	20%	31%
Adoption of Internet of Things (IoT) hardware and software	27%	31%	23%	28%
Growing public concern over data privacy	35%	30%	42%	34%
Cybersecurity and data privacy regulations	46%	38%	48%	50%
Vulnerabilities in supply chains and business partners	28%	21%	25%	36%
Rising geopolitical tensions	27%	25%	28%	27%
Human vulnerabilities (unintentional or malicious)	35%	40%	38%	29%
Other (please specify)	0%	0%	0%	0%
Don't know	2%	2%	2%	2%
Data shown:
Yes - expect 1 or 2 M&A/Divestitures/Carve-out activities	31%	24%	24%	30%
Yes - expect 3 to 5 M&A/Divestitures/Carve-out activities	26%	35%	31%	28%
Yes - expect more than 5 M&A/Divestitures/Carve-out activities	15%	24%	11%	15%
No - we don't plan to consider any M&A/Divestitures/Carve-out activities expected within next 5 years	17%	10%	22%	13%
No - but we expect to be the target of an M&A/ Divestiture/Carve-out activity expected within next 5 years	5%	4%	4%	6%
Don't know	6%	2%	8%	9%
Data shown: separated by commas in each table cell.
Selection of clients	16%,42%,38%,5%	10%,43%,43%,4%	19%,41%,35%,5%	19%,41%,35%,5%
Selection of suppliers (value chain partners)	15%,45%,38%,3%	14%,45%,40%,1%	15%,46%,35%,4%	15%,44%,38%,3%
Products/service offering	11%,48%,38%,3%	10%,51%,37%,2%	14%,41%,41%,4%	10%,51%,35%,3%
Investment decisions	14%,41%,42%,3%	13%,40%,47%,0%	13%,40%,41%,6%	15%,43%,38%,4%
Lending decisions	14%,43%,41%,2%	12%,45%,43%,0%	18%,41%,38%,3%	11%,43%,42%,4%
Recruitment of employees	20%,42%,36%,2%	13%,52%,35%,0%	24%,33%,40%,3%	22%,41%,34%,3%
Overall organisation's strategy	11%,38%,47%,4%	11%,41%,48%,0%	14%,34%,43%,9%	9%,40%,50%,2%
Data shown:
Change the composition of the workforce between permanent and contingent staff	35%	33%	38%	34%
Hire from competitors	34%	33%	34%	34%
Acquire a firm to access new skills/expertise	35%	38%	28%	40%
Establish a strong pipeline direct from education	38%	40%	36%	39%
Hire from outside the industry	24%	23%	29%	21%
Undertake significant retraining/upskilling	44%	41%	45%	47%
Outsource non-core activities to third parties	33%	35%	30%	34%
Other (please specify)	0%	0%	0%	0%
Don't know	4%	3%	5%	4%
Data shown for Trend 1:
Data shown for Trend 2:
Data shown for Trend 3:
Data shown for Trend 4:
Data shown for Trend 5:
Data shown for Trend 6:
Data shown for Trend 7:
Trend 1: Interest rates	62%,32%,6%	69%,25%,5%	58%,34%,8%	60%,35%,5%
Trend 2: Alternative finance	52%,40%,8%	62%,33%,5%	48%,44%,8%	48%,42%,10%
Trend 3: Sources of capital	55%,36%,9%	70%,24%,5%	51%,39%,10%	45%,45%,10%
Trend 4: Regulatory initiatives	49%,40%,12%	56%,40%,4%	40%,42%,18%	50%,37%,12%
Trend 5: Globalisation	41%,43%,16%	48%,47%,4%	34%,40%,26%	42%,43%,15%
Trend 6: Digital v Bricks & Mortar	66%,24%,10%	69%,24%,7%	60%,25%,15%	69%,24%,8%
Trend 7: Big tech in FS	65%,29%,6%	74%,25%,1%	63%,27%,10%	58%,34%,8%
Data shown:
New and digital only market entrants	14%	12%	15%	13%
Inadequacy of basic infrastructure	8%	15%	6%	5%
Increasing frequency of cyber threats	17%	13%	21%	16%
Regulatory compliance	21%	14%	25%	23%
Investor demands	9%	5%	12%	10%
Low or zero interest rate environment	19%	23%	18%	17%
Increasing inequality	11%	15%	10%	8%
Geopolitical uncertainty	15%	15%	8%	10%
Climate change and environmental issues e.g. ESG	16%	16%	18%	14%
Crisis response preparedness	13%	13%	13%	13%
Customers loss of trust in their financial institutions	14%	16%	18%	9%
Attracting and retaining talented employees	17%	19%	15%	16%
Attracting new customers	18%	19%	12%	24%
Retaining existing customers	11%	10%	16%	17%
Increasing profitability of customers	17%	15%	15%	20%
Impact of new technologies	20%	16%	16%	27%
Product development	9%	12%	7%	9%
Pressure on Fees	15%	14%	19%	12%
Other (please specify)	0%	2%	3%	1%
Digital transformation	26%	21%	25%	30%
Don't know	2%	0%	0%	0%

Thinking about the different areas that could potentially be impacted by regulatory changes over the next 5 years, which areas of regulation are you most concerned about? Which of the following factors will have the greatest impact in shaping your cybersecurity strategy over the next 5 years? Is your organisation likely to consider any Merger & Acquisition (M&A), Divestitures or Carve-out activity in the next 5 years? To what extent do you expect ESG (Environmental, Social and Corporate Governance) to influence the following aspects of your organisation's business model? The role of employees in Financial Services organisations is changing. Which of the following activities is your organisation planning topursue over the next 5 years to address a potential future skills gap? Thinking about macro trends in the financial services industry, which of the statements below do you think is most likely to be true in the 2025? And finally, thinking ahead to 2025,what do you expect to be your organisation’s top 3 challenges over the next 5 years in the order of priority for your organisation? - Ranked 1-3

Insurance

Questions and Answers	Global	Asia Pac	EMEA	Americas
Data shown:
AML (Anti Money Laundering)	55%	46%	51%	66%
Use of new technology	28%	23%	20%	38%
Enhanced accountability	29%	27%	31%	29%
Open Banking	29%	27%	31%	29%
Central Bank Digital Currency (CBDC)	26%	35%	29%	17%
Data privacy and cybersecurity	17%	25%	12%	16%
Environment and climate (e.g. ESG)	17%	21%	14%	16%
Customer communication	17%	19%	14%	19%
Digital identity authentication	21%	27%	18%	19%
E-money/Cryptocurrency	27%	27%	22%	31%
KYC (Know Your Customer)	23%	27%	12%	28%
Local regulatory pressures - different regulations in different regions	23%	29%	22%	17%
New business model (crowdfunding, peer-to-peer lending)	11%	8%	8%	16%
Other (please specify)	0%	0%	0%	0%
Don't know	4%	6%	6%	0%
Data shown:
Shortage of cybersecurity talent	43%	42%	45%	41%
Introduction of new authentication technologies, such as biometrics	45%	42%	45%	47%
Increasing complexity of cyber threats	36%	29%	37%	41%
Introduction of fifth-generation (5G) cellular networks	37%	33%	43%	36%
Adoption of Internet of Things (IoT) hardware and software	30%	25%	22%	40%
Growing public concern over data privacy	24%	21%	20%	29%
Cybersecurity and data privacy regulations	32%	25%	37%	33%
Vulnerabilities in supply chains and business partners	23%	23%	33%	16%
Rising geopolitical tensions	21%	19%	22%	22%
Human vulnerabilities (unintentional or malicious)	25%	19%	24%	29%
Other (please specify)	0%	0%	0%	0%
Don't know	5%	6%	4%	5%
Data shown:
Yes - expect 1 or 2 M&A/Divestitures/Carve-out activities	23%	25%	33%	26%
Yes - expect 3 to 5 M&A/Divestitures/Carve-out activities	28%	17%	29%	22%
Yes - expect more than 5 M&A/Divestitures/Carve-out activities	23%	8%	12%	10%
No - we don't plan to consider any M&A/Divestitures/Carve-out activities expected within next 5 years	10%	21%	22%	26%
No - but we expect to be the target of an M&A/ Divestiture/Carve-out activity expected within next 5 years	6%	10%	4%	5%
Don't know	10%	19%	0%	10%
Data shown: separated by commas in each table cell.
Selection of clients	26%,44%,29%,1%	15%,44%,40%,2%	22%,45%,33%,0%	40%,43%,17%,0%
Selection of suppliers (value chain partners)	21%,50%,26%,3%	21%,48%,25%,6%	20%,53%,27%,0%	22%,48%,26%,3%
Products/service offering	15%,45%,39%,1%	10%,42%,46%,2%	8%,57%,33%,2%	24%,38%,38%,0%
Investment decisions	15%,44%,39%,3%	17%,38%,46%,0%	16%,43%,39%,2%	12%,50%,33%,5%
Lending decisions	25%,46%,25%,5%	21%,50%,27%,2%	22%,49%,22%,6%	31%,40%,24%,5%
Recruitment of employees	23%,45%,28%,5%	29%,46%,25%,0%	16%,45%,33%,6%	24%,43%,26%,7%
Overall organisation's strategy	14%,46%,37%,3%	13%,40%,46%,2%	16%,43%,39%,2%	14%,55%,28%,3%
Data shown:
Change the composition of the workforce between permanent and contingent staff	26%	33%	27%	21%
Hire from competitors	26%	21%	37%	21%
Acquire a firm to access new skills/expertise	27%	33%	22%	26%
Establish a strong pipeline direct from education	34%	29%	24%	45%
Hire from outside the industry	28%	21%	31%	33%
Undertake significant retraining/upskilling	49%	44%	53%	50%
Outsource non-core activities to third parties	35%	42%	29%	34%
Other (please specify)	0%	0%	0%	0%
Don't know	5%	4%	4%	7%
Data shown for Trend 1:
Data shown for Trend 2:
Data shown for Trend 3:
Data shown for Trend 4:
Data shown for Trend 5:
Data shown for Trend 6:
Data shown for Trend 7:
Trend 1: Interest rates	54%,34%,12%	50%,33%,17%	53%,35%,12%	59%,33%,9%
Trend 2: Alternative finance	50%,37%,12%	52%,35%,13%	45%,37%,18%	53%,40%,7%
Trend 3: Sources of capital	46%,32%,22%	48%,25%,27%	41%,37%,22%	50%,33%,17%
Trend 4: Regulatory initiatives	44%,43%,14%	33%,50%,17%	55%,27%,18%	43%,50%,7%
Trend 5: Globalisation	30%,44%,26%	35%,44%,21%	33%,41%,27%	24%,47%,29%
Trend 6: Digital v Bricks & Mortar	61%,24%,15%	35%,40%,25%	76%,12%,12%	71%,21%,9%
Trend 7: Big tech in FS	60%,27%,13%	58%,27%,15%	55%,29%,16%	66%,26%,9%
Data shown:
New and digital only market entrants	19%	21%	22%	14%
Inadequacy of basic infrastructure	15%	15%	14%	17%
Increasing frequency of cyber threats	19%	15%	14%	26%
Regulatory compliance	25%	21%	31%	24%
Investor demands	17%	19%	16%	17%
Low or zero interest rate environment	16%	15%	16%	17%
Increasing inequality	19%	19%	27%	14%
Geopolitical uncertainty	14%	13%	12%	17%
Climate change and environmental issues e.g. ESG	13%	13%	16%	10%
Crisis response preparedness	13%	15%	12%	12%
Customers loss of trust in their financial institutions	10%	13%	27%	28%
Attracting and retaining talented employees	23%	10%	12%	9%
Attracting new customers	11%	13%	12%	9%
Retaining existing customers	15%	13%	18%	16%
Increasing profitability of customers	16%	27%	10%	12%
Impact of new technologies	11%	13%	12%	9%
Product development	12%	10%	10%	14%
Pressure on Fees	12%	13%	12%	10%
Other (please specify)	10%	15%	4%	10%
Digital transformation	2%	0%	0%	0%
Don't know	0%	2%	0%	3%

Thinking about the different areas that could potentially be impacted by regulatory changes over the next 5 years, which areas of regulation are you most concerned about? Which of the following factors will have the greatest impact in shaping your cybersecurity strategy over the next 5 years? Is your organisation likely to consider any Merger & Acquisition (M&A), Divestitures or Carve-out activity in the next 5 years? To what extent do you expect ESG (Environmental, Social and Corporate Governance) to influence the following aspects of your organisation's business model? The role of employees in Financial Services organisations is changing. Which of the following activities is your organisation planning topursue over the next 5 years to address a potential future skills gap? Thinking about macro trends in the financial services industry, which of the statements below do you think is most likely to be true in the 2025? And finally, thinking ahead to 2025,what do you expect to be your organisation’s top 3 challenges over the next 5 years in the order of priority for your organisation? - Ranked 1-3

Payments

Questions and Answers	Global	Asia Pac	EMEA	Americas
Data shown:
AML (Anti Money Laundering)	13%
Use of new technology	26%
Enhanced accountability	17%
Open Banking	30%
Central Bank Digital Currency (CBDC)	30%
Data privacy and cybersecurity	39%
Environment and climate (e.g. ESG)	30%
Customer communication	26%
Digital identity authentication	13%
E-money/Cryptocurrency	22%
KYC (Know Your Customer)	26%
Local regulatory pressures - different regulations in different regions	26%
New business model (crowdfunding, peer-to-peer lending)	17%
Other (please specify)	0%
Don't know	0%
Data shown:
Shortage of cybersecurity talent	26%
Introduction of new authentication technologies, such as biometrics	30%
Increasing complexity of cyber threats	39%
Introduction of fifth-generation (5G) cellular networks	26%
Adoption of Internet of Things (IoT) hardware and software	26%
Growing public concern over data privacy	30%
Cybersecurity and data privacy regulations	48%
Vulnerabilities in supply chains and business partners	17%
Rising geopolitical tensions	26%
Human vulnerabilities (unintentional or malicious)	30%
Other (please specify)	0%
Don't know	0%
Data shown:
Yes - expect 1 or 2 M&A/Divestitures/Carve-out activities	30%
Yes - expect 3 to 5 M&A/Divestitures/Carve-out activities	30%
Yes - expect more than 5 M&A/Divestitures/Carve-out activities	13%
No - we don't plan to consider any M&A/Divestitures/Carve-out activities expected within next 5 years	17%
No - but we expect to be the target of an M&A/ Divestiture/Carve-out activity expected within next 5 years	0%
Don't know	9%
Data shown: separated by commas in each table cell.
Selection of clients	13%,30%,52%,4%
Selection of suppliers (value chain partners)	22%,30%,43%,4%
Products/service offering	9%,43%,43%,4%
Investment decisions	4%,43%,43%,9%
Lending decisions	13%,48%,35%,4%
Recruitment of employees	17%,35%,48%,0%
Overall organisation's strategy	9%,39%,43%,9%
Data shown:
Change the composition of the workforce between permanent and contingent staff	17%
Hire from competitors	22%
Acquire a firm to access new skills/expertise	22%
Establish a strong pipeline direct from education	39%
Hire from outside the industry	52%
Undertake significant retraining/upskilling	26%
Outsource non-core activities to third parties	52%
Other (please specify)	0%
Don't know	0%
Data shown for Trend 1:
Data shown for Trend 2:
Data shown for Trend 3:
Data shown for Trend 4:
Data shown for Trend 5:
Data shown for Trend 6:
Data shown for Trend 7:
Trend 1: Interest rates	65%,22%,13%
Trend 2: Alternative finance	52%,26%,22%
Trend 3: Sources of capital	65%,22%,13%
Trend 4: Regulatory initiatives	52%,43%,4%
Trend 5: Globalisation	39%,43%,17%
Trend 6: Digital v Bricks & Mortar	83%,13%,4%
Trend 7: Big tech in FS	74%,26%,0%
Data shown:
New and digital only market entrants	9%
Inadequacy of basic infrastructure	22%
Increasing frequency of cyber threats	4%
Regulatory compliance	0%
Investor demands	13%
Low or zero interest rate environment	13%
Increasing inequality	26%
Geopolitical uncertainty	0%
Climate change and environmental issues e.g. ESG	13%
Crisis response preparedness	9%
Customers loss of trust in their financial institutions	9%
Attracting and retaining talented employees	22%
Attracting new customers	26%
Retaining existing customers	30%
Increasing profitability of customers	17%
Impact of new technologies	35%
Product development	17%
Pressure on Fees	13%
Other (please specify)	0%
Digital transformation	17%
Don't know	0%

Where are we now?

Sending a text to pay for a bus ticket in Turkey, using a QR code to pay for groceries in China, or tapping a sales terminal with a mobile phone in the US. 

Even before COVID-19, these ways of paying for goods and services were evidence of a steady shift to digital payments— a shift that might ultimately lead to a cashless global society. Global cashless payment volumes are set to increase by more than 80% from 2020 to 2025, from about 1tn transactions to almost 1.9tn, and to almost triple by 2030, according to analysis by PwC and Strategy&.

Asia-Pacific will grow fastest, with cashless transaction volume growing by 109% until 2025 and then by 76% percent from 2025 to 2030, followed by Africa (78%, 64%) and Europe (64%, 39%). Latin America comes next (52%, 48%), with the US and Canada growing least rapidly (43%, 35%).

This means that by 2030 the number of cashless transactions will be about double to triple the current level, across regions.

During COVID-19 lockdowns, many people adopted digital behaviours, accelerating the proliferation of mobile-first digital economies and rendering cash even less relevant to daily life than it already was (although in less developed economies, cash remained essential). In our latest global survey of banking, fintech and payments organisations, 89% of respondents agreed that the shift towards e-commerce would continue to increase, requiring significant investment in online payment solutions. Not only that, but they agreed (97%) that there will be a shift towards more real-time payments. 

Underneath the shift to cashless lies a larger, more profound change. Not only are traditional ways of paying for goods and services — including the humble paper check and analogue invoices — set for radical transformation, but the entire infrastructure of payments is being reshaped, with new business models emerging. 

That reshaping involves two parallel trends: an evolution of the front- and back-end parts of the payment system (instant payments; bill payments and request to pay; and plastic cards and digital wallets); and a revolution involving huge structural changes to the payment mix and ecosystem (emergence of so-called “buy now, pay later” offerings; cryptocurrencies; and work underway on central bank digital currencies). 

Both evolution and revolution are sweeping the globe, but in different ways and at different paces, creating a complex payments matrix. Many organisations are trying to figure out where to play — and win — in that matrix, as evidenced by the intense level of merger and acquisition (M&A) activity since 2017.

Trends driving M&A activity

Processor consolidation.

This has been a US-led trend, with a focus on building domestic scale, culminating in three landmark, multibillion-dollar deals in 2019: the acquisition by Global Payments of TSYS; Fiserv buying FirstData; and FIS acquiring Worldpay.

Merchant services

An ongoing trend across the US and Europe. Examples include the acquisition of Ingenico by French firm Worldline the same year, following its purchase of Swiss-based SIX Payment Services in 2018.

Card networks moving closer to the user

This trend started with Mastercard acquiring UK’s Vocalink in 2016, and then purchasing another account-to-account business in 2020, the year which also saw Visa’s attempt to buy Plaid, the open banking aggregator.

Global mobile wallets and super-apps

A nascent theme yet could become one of the biggest. Alipay has been pursuing a global mobile wallet play with multiple investments in domestic mobile wallets and franchises in Asia. Big Tech firms are also investing in leading payment technologies globally.

Fast-growing Asian markets are driving new business models and innovation. In China, Alipay and WeChat Pay have created a new paradigm around “super-apps” as payment platforms. Our latest global survey of senior financial services executives showed that 78% of respondents said Asian institutions will move at a faster pace on globalisation and convergence than the rest of the world up to 2025, with those in Europe and the Americas struggling to keep up.   

With rising strategic significance, some governments are developing payments infrastructure as part of industrial policy to control money flows and own digital and data platforms. These changes have resulted in a mushrooming of domestic payment methods on the back of those infrastructures, such as TROY in Turkey, Mir in Russia, and Brazil’s Elo and PIX  systems.

The sector has also become increasingly important as a catalyst for reducing transaction costs, fostering growth and supporting the transition towards digitally enabled and inclusive economies. In developing economic regions in Africa, payments are growing faster than the global average and are allowing millions of “unbanked” people to gain access to goods and services without cash. 

The key asset in all of this is data. Payments generate roughly 90% of banks’ useful customer data — information about who is buying what, how much, and when. This is creating new revenue streams for payments businesses that can monetise that data, yet also exposes them to issues and risks related to data privacy. 

In our survey, data privacy and cybersecurity were the joint top concern (48%) in terms of the impact of regulatory changes over the next five years.  This far outstrips second-ranked digital identity and authentication (31%), and well ahead of cryptocurrencies and central bank digital currencies (CBDCs) (both ranked joint fifth at 28%).

How the payments matrix develops will be determined by the response of banks, technology companies, regulators, governments and consumers to arguably the most profound change in how money moves — even what defines money in our society — for decades to come.

Six macrotrends affecting the future of payments

Six macro trends — driven by a combination of consumer preference, technology, regulation and M&A – will define how the next five years play out. We believe leadership teams need to understand each of these trends in order to properly plan for their future.

• Inclusion and trust
• Digital currencies
• Digital wallets
• Battle of the rails
• Cross-border payments
• Financial crime

1. Inclusion and trust

In 2014, the World Bank set a goal under its Universal Financial Access program that by 2020, adults who were not part of the formal financial system would be able to have access to a transaction account to store money and send and receive payments. 

That goal is still some way off from being achieved, but there’s a growing number of initiatives to address, like Thailand’s PromptPay which enables users to make and receive payments using bank accounts or digital wallets linked to their national ID, mobile phone number or email address. By 2019, it had attracted 43 million subscribers , in a country with a population at the time of 69.5 million.  

In developing countries, financial inclusion will continue to be driven by mobile devices and providing access to affordable, convenient payment mechanisms. By 2025, smartphone penetration is estimated to reach 80% globally , driven by uptake in emerging markets like Indonesia, Pakistan, and Mexico. Trust in these systems, particularly as central banks consider the feasibility of CBDCs, puts new emphasis on the role of supervisors to ensure data privacy and traceability for consumers and businesses. 

2. Digital currencies 

CBDCs — digital tokens or electronic records that represent the virtual form of a nation’s currency — along with private sector cryptocurrencies are predicted to have the biggest disruptive impact over the next 20 years (see Figure 4). In our survey, financial services organisations in Europe, the Middle East and Africa with more than US$5bn in revenues cited “market uncertainty and potential disruption,” such as the introduction of CBDCs, within their top three concerns.

Prominent private sector examples like the Diem, proposed in 2019 by Facebook as a form cryptocurrency that would be backed by a basket of sovereign currencies, could replace account-based payments with a tokenised system of non-sovereign payment systems.

Scepticism within central banks about the potential of private sector cryptocurrencies to undermine the conduct of monetary policy may begin to shift, as some players have recently said they’re prepared to facilitate use of such digital assets. While a recent BIS survey suggests that 60% of central banks are considering CBDCs,  and 14% are actively conducting pilot tests. Observers believe that China may be the first to launch its digital renminbi — or “e-yuan” — at the Winter Olympics next year , in what may be seen as a prelude to the decentralisation of finance.

3. Digital wallets

Digital wallets allow consumers to load and store payment methods and access funding sources, such as cards or accounts, on their mobile devices. These wallets will be increasingly pivotal as a payment “front end,” as exemplified by Apple Pay, the relaunched Google Pay and the rise of super-apps WeChat Pay and Alipay in China.

The use of digital-wallet-based transactions grew globally by 7% in 2020, according to a report by FIS, a financial services technology group, which predicts that digital wallets will account for more than half of all e-commerce payments worldwide by 2024, as consumers shift from card-based to account- and QR code-based transactions. 

In response, banks and card companies have been partnering with or investing in digital wallet businesses to create payments platforms with scale, such as Standard Chartered bank’s venture with  Toss , the largest payments company in South Korea, operated by Viva Republica.

Looking ahead, as many as 86% of our survey respondents agreed with the prediction that traditional payments providers will collaborate with fintechs and technology providers for innovation. 45% of respondents “strongly agreed” that there will be increased investment in mobile technology beyond retail payments to support business-to-business (B2B) payments and the digitalisation of supply chains.

4. Battle of the rails

Behind-the-scenes payments processing — the “plumbing” of payments — is also changing, as payment initiation changes from cards and traditional accounts to digital wallets and as regulators force the industry to strengthen, or build up, domestic infrastructure for payments.  

As a result, international card networks and card processors, often US-domiciled, are facing pressure on their core business, and have started to reposition themselves to retain relevance. Outsourcing of cloud and platform infrastructure will become increasingly important, too. In our survey, eight out of ten financial services organisations expected to have outsourced such infrastructure by 2025.

Other issues for processors and networks will be ensuring relevance in the merchant services space, where payments are initiated. They can double down on the provision of value-added services and open up the existing card rails to a wider range of payee and payer points. Digital wallet providers will look to adopt “open-loop” technologies and seek interoperability in order to benefit from (and not fall behind on) the ongoing globalisation of payment rails.

5. Cross-border payments 

F rustration with the traditional correspondent banking model, both cumbersome and costly in a world of instant, low-cost payments, has led to the intensification of non-bank providers. New players and solutions are competing with bank and card-based solutions at scale, like the P27 initiative in the Nordic region, integrating 27m inhabitants across four countries and currencies in one “domestic” instant payments system.

In our survey, 42% of respondents felt strongly that there would be an acceleration of cross-border, cross-currency instant and B2B payments in the next five years. This is reinforced by the adoption of ISO 20022, a globally developed methodology for transmitting data which provides a consistent messaging standard for payments. 

A recent pilot by Faster Payments Service, owned and operated by British retail payments authority Pay.UK, saw the fastest payment ever sent from Australia to a UK beneficiary, with confirmation of credit and funds available in just 36 seconds. Singapore and Thailand recently linked their respective national systems PayNow and PromptPay, allowing registered users on either system to instantly send money between the two countries using only a mobile phone number.

6. Financial crime

The pandemic’s effect in driving increased e-commerce provided an opening for fraudsters, with the average value of attempted fraudulent purchases rising by almost 70% in 2020 , compared with the previous year, according to a report by digital fraud prevention company Sift.

Open banking, combined with a set of new players and the shift towards payment initiation and digital wallets, is also opening new doors for all types of financial crime, such as the increased risk to consumers from authorised push payments (APP) scams across payment networks, globally. Payment providers that help merchants and their customers move money across borders might also enable sanctions evasion and money laundering. 

In our survey, security, compliance, and data-privacy risks and related issues were the top concern for banks, fintechs and asset managers in implementing a fully integrated technology strategy. All this points to the need for, and likelihood of, greater collaboration among banks, payment providers and the public sector in preventing fraud and money laundering, with expected trade-offs between cybersecurity measures and customer convenience, according to a recent Bank for International Settlements report .

What kinds of solutions are trending

Machine-learning-based tools .

These are analytical services with machine learning and AI capabilities to identify authorised payment fraud. They encompass the necessary speed and processing capabilities that are required to analyse data in real-time. 

Risk scoring tools

Risk scoring tools use statistical models to identify possibly fraudulent transactions. Risk scoring allocates a probability of fraud using evolving criteria.

Mule account modelling tools 

Mule accounts (those set up by a real customer but with fraudulent papers or identity to enable criminal use) can be targeted using modelling tools that find behaviour patterns in anonymous crowdsourced intelligence from millions of daily consumer activities.

Implications for payments players

Understanding these trends is crucial for banks, card companies, fintechs and others to be able to map a new path to 2025 and beyond. 

Banks need to work with business customers to help them integrate payments into their services directly. This will help them deal with a world in which increasingly multifunctional digital wallets and super-apps are proliferating. Bill payments and request-to-pay or instant cross-border offerings could provide opportunities for some larger banks.

Card processors might need to consider moves that position them more effectively for payment initiation, such as partnering with significant digital wallet providers. In this way, they can ensure relevance in the merchant services space, where payments are initiated. Processors also need to bridge the card- and account-based payment worlds and adopt cloud and artificial intelligence technologies to avoid being overtaken by a new generation of cloud-based solutions.

Payment services providers have to work on ensuring transparent global structures and creating trust and visibility with regard to client acceptance, their ability to bear credit risk, and ensuring efficient global supervision structures. They also need to fully master data to win in the race for global scale.

Central banks and supervisors will need to improve their knowledge in order to provide effective supervision of increasingly global players that are not banks.

A new way to think about the future of your business

One of the main challenges at any organisation is determining how to best allocate precious resources to bring about the types of change required to not only manage through the crises of today, but to be successful tomorrow. We’ve created a framework that gives examples of how payment leaders can determine gaps and priorities.

Accelerated by the pandemic, the shift to a cashless society and the rising role of payments as more than simply an exchange of value for goods and services create a once-in-a-lifetime opportunity for the payments industry to lead in financial services. At the same time, by becoming a cornerstone of the global economy, payments can serve as a catalyst for economic growth, innovation and inclusion. Firms now need to define what their role will be in this evolution. It is critical for firms to understand what they need to do to stay relevant and how to improve the customer experience and contribute to a bigger societal purpose. We look forward to helping you and your institution successfully secure your tomorrow, today.

Navigating the payments matrix: Charting a course amid evolution and revolution

Read the 30-page report.

Kurtis Babczenko

Global Banking and Capital Markets Leader, and US Finance Transformation Leader, PwC United States

Chantal Maritz

Director | Strategy& Payments Transformation, PwC South Africa

Tel: +27 (0) 11 287 0289

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Love's Joins Digital Fuel Payment Network

OKLAHOMA CITY —  Love's Travel Stops is integrating with the digital payment network of fintech company Relay Payments. 

Relay's fuel payment solution is currently accessed by more than 400,000 drivers and 100,000 carriers, which utilize it for secure, over-the-road payments for fuel, scales, cash advances and lumpers. 

Love's joins  Pilot Co. ,  Maverik — Adventure’s First Stop ,  Yesway , AMBEST and  Onvo in Relay's network. According to the company, this expansion will help further modernize over-the-road payments for the trucking industry. 

"Relay's acceptance at leading fueling stops speaks to the rapid adoption of our solutions and the industry's need for a comprehensive and secure digital payment network," said Relay CEO Ryan Droege. "Our mission is to build an end-to-end digital payments network designed specifically for the trucking and logistics industry, helping fleets and drivers keep more of their earnings and reduce frustrations."

The Relay fuel payment solution includes other benefits for carriers and drivers such as:

• A nationwide payment network which helps protect companies from fraud;
• A comprehensive suite of over-the-road digital payments for fuel, scales and lumpers that increases hours of service and improves the driver experience; and
• A 24/7, U.S.-based customer service team that answers the phone in under 30 seconds.

"At Gulf Relay, we thoroughly vet new vendors to ensure they help us save time and money," said Andy Vanzant, chief operating officer at Gulf Relay. "Relay Payments has not only met our expectations but exceeded them, and our drivers love using Relay at their favorite Love's locations across the country. Relay has set a new standard for how our drivers pay for goods and services over the road."

Founded in 2019 and based in Atlanta, Relay Payments currently employs more than 150 team members. Its customers include carriers and logistics companies across the United States, such as Schneider, Coyote Logistics and Old Dominion. According to the company, Relay has processed millions of transactions with zero instances of fraud.

Headquartered in Oklahoma, family-owned and -operated Love's core business is travel stops and convenience stores with 648 locations in 42 states. The company has nearly 40,000 team members in North America and Europe.

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The Federal Reserve, the central bank of the United States, provides the nation with a safe, flexible, and stable monetary and financial system.

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The 2019 Federal Reserve Payments Study

The 2019 Federal Reserve Payments Study (2019 study) is the seventh in a series of triennial studies conducted by the Federal Reserve System since 2001 to estimate aggregate trends in noncash payments in the United States.

This brief contains initial results for 2018 on the national use of core noncash payment systems, defined as credit cards, prepaid and non-prepaid debit cards, the automated clearinghouse (ACH) system, and checks. It also reports initial data for 2018 on the national use of automated teller machines (ATMs) for cash withdrawals. 1 The 2018 data are compared with data from previous years to track changes in the U.S. payments system over those years. Some data from previous survey years are restated in this brief to account for new information or to provide consistency in light of changes to survey questions and definitions. 2

Estimates of core noncash payment volumes are based on survey data gathered from depository and financial institutions, general-purpose card networks, and general-purpose and private-label card processors and issuers in the United States. 3 The 2019 study covers payments initiated in 2018 from U.S. domestic deposit, prepaid debit card program and credit card accounts, as well as withdrawals and deposits of cash at depository institutions. The data encompass the payment and withdrawal activities of consumers and businesses, including for-profit and not-for-profit enterprises and federal, state, and local government agencies.

Key Findings

• The number of core noncash payments, comprising debit card, credit card, ACH, and check payments, reached 174.2 billion in 2018, an increase of 30.6 billion from 2015. The value of these payments totaled $97.04 trillion in 2018, an increase of $10.25 trillion from 2015. 4
• By number, the growth rate of core noncash payments was 6.7 percent per year from 2015 to 2018, higher than the growth rate of 5.1 percent per year from 2012 to 2015. By value, the recent growth rate (3.8 percent per year) was slightly higher than the growth rate of the prior period (3.6 percent per year).
• Total card payments (both credit and debit), which represented 7.3 percent of core noncash payments by value and 75.3 percent by number in 2018, grew at a rate of 8.9 percent per year by number between 2015 and 2018—up from the 6.8 percent yearly rate of increase from 2012 to 2015. Debit cards, including both prepaid and non-prepaid, were used almost twice as often as credit cards in 2018, but the value of credit card payments exceeded the value of debit card payments by almost 30 percent.
• The value of remote general-purpose card payments reached $3.29 trillion in 2018, nearly equal to the value of in-person general-purpose card payments, driven in part by growing e-commerce card payments and the use of cards for recurring bill payments.
• In-person general-purpose card payments increasingly involved chip authentication: More than half used chip authentication in 2018 compared with 2.0 percent in 2015.
• Total ACH payments, comprising both credit transfers and debit transfers, grew 6.0 percent per year by number and 7.2 percent per year by value from 2015 to 2018, faster by both measures than from 2012 to 2015.
• In 2018, for the first time, the number of ACH debit transfers (16.6 billion) exceeded the number of check payments (14.5 billion). In 2000, in contrast, the number of ACH debit transfers stood at 2.1 billion compared to 42.6 billion check payments.
• In a return to the more accelerated decline observed from 2003 to 2012, the number of check payments fell 7.2 percent per year from 2015 to 2018. After increasing from 2012 to 2015, the value of check payments resumed its decline, decreasing 4.0 percent per year from 2015 to 2018.
• The number of ATM cash withdrawals was 5.1 billion in 2018, a slight decline of 0.1 billion from 2015. The average value of ATM cash withdrawals continued to rise, increasing to $156 in 2018 from $146 in 2015, accordant with the continued decrease in the total number and the continued rise in the total value of ATM cash withdrawals.

Overview of Noncash Payments

Taken together, prepaid and non-prepaid debit cards, credit cards, ACH credit and debit transfers, and checks compose a set of noncash payment types commonly used today by consumers and businesses in the United States. These core noncash payment types have retained their ability to be used in traditional ways even as they are adapted for use in innovative, nontraditional ways. Indeed, many alternative payment methods and services, such as smartphone and internet-based services, ultimately involve payments processed through the general-purpose card networks or the ACH system.

In 2018, the number of non-prepaid debit card and credit card payments were each well above the number of either prepaid debit card payments, ACH debit transfers, ACH credit transfers, or check payments ( figure 1 ). The order by value of the different noncash payment types is nearly the reverse of order by number, with ACH credit transfers, ACH debit transfers, and checks each registering substantially higher total values than the three card types in all years of the study since 2000 ( figure 2 ).

Figure 1. Trends in noncash payments, by number, 2000–18

Note: All estimates are on a triennial basis. Card payments were also estimated for 2016 and 2017. Credit card payments include general-purpose and private-label versions. Prepaid debit card payments include general-purpose, private-label, and electronic benefits transfer (EBT) versions. Estimates for prepaid debit card payments are not displayed for 2000 and 2003 because only EBT was collected.

Figure 2. Trends in noncash payments, by value, 2000–18

From 2015 to 2018, the average values of ACH credit transfers and checks increased, the average value of ACH debit transfers decreased, and the average values of non-prepaid debit card, prepaid debit card, and credit card payments were essentially unchanged. The overall average value of noncash payments, which includes all of these payment types, declined to $557 in 2018 from $604 in 2015 ( table B.1 ). This decrease in the overall average value of noncash payments reflects the continued expansion of smaller-value card payments in the total number of noncash payments. In particular, despite the substantially lower average value of card payments, the share of card payments out of all noncash payments increased enough to offset the higher average values of ACH and check payments. Detailed discussion of each payment type below will help shed light on these trends.

Card Payments

Total card payments grew to 131.2 billion with a value of $7.08 trillion in 2018, up 29.7 billion and $1.56 trillion since 2015. Card payments grew at an accelerated rate of 8.9 percent per year by number and 8.6 percent per year by value from 2015 to 2018, compared with 6.8 percent per year by number and 5.9 percent per year by value from 2012 to 2015 ( table B.2 ). The similar growth rates by number and value from 2015 to 2018 coincide with a stable average value of $54 for card payments in those two years. In 2018, card payments comprised 75.3 percent of all noncash payments by number but only 7.3 percent by value, an increase from 70.7 percent by number and 6.4 percent by value in 2015.

Non-prepaid debit card payments accounted for 55.4 percent of all card payments in 2018 by number, a negligible decrease from 55.8 percent in 2015. The number of non-prepaid debit card payments increased by 16.0 billion since 2015 to reach 72.7 billion in 2018. This total is approximately equal to the total number of noncash payments of all payment types reported for 2000 in the first triennial study. The number of non-prepaid debit card payments grew 8.7 percent per year from 2015 to 2018, slightly faster than the growth in value of 8.1 percent per year. Growth in the number and value of non-prepaid debit card payments accelerated over the 2015 to 2018 period compared with the 2012 to 2015 period, although the average value of non-prepaid debit card payments was stable at $38 in 2015 and 2018.

Prepaid debit card payments accounted for 10.5 percent of all card payments in 2018 by number, a decrease from 11.1 percent in 2015. The number of prepaid debit card payments increased to 13.8 billion with a value of $0.35 trillion in 2018, an increase of 2.6 billion and $0.06 trillion from 2015. 5

• General-purpose prepaid debit card payments accounted for 43.7 percent of all prepaid debit card payments in 2018 by number, up from 37.9 percent in 2015. General-purpose prepaid debit card payments reached 6.0 billion with a value of $0.19 trillion in 2018, increasing from 4.3 billion and $0.15 trillion in 2015. These increases in the number and value of payments from 2015 to 2018 correspond to growth rates by number and value of 12.3 percent per year and 8.7 percent per year, respectively. The average value of these payments dropped from $35 in 2015 to $32 in 2018.
• Private-label prepaid debit card payments accounted for 40.2 percent of all prepaid debit card payments by number, up from 38.9 percent in 2015. These payments increased to 5.5 billion in 2018 from 4.4 billion in 2015, corresponding to a growth rate of 8.3 percent per year from 2015 to 2018. The value of these payments increased more rapidly, at 12.5 percent per year from 2015 to 2018, to reach $0.10 trillion in 2018, up from $0.07 trillion in 2015. Consistent with the more rapid growth in value than number, the average value of private-label prepaid debit card payments has increased steadily from $13 in 2012 to $16 in 2015 to $18 in 2018.
• Prepaid EBT card payments by number and value were about one in six of all prepaid debit card payments in 2018. The number of prepaid EBT card payments was 2.2 billion with a value of $0.06 trillion in 2018, a decline of 5.2 percent per year by number and 7.8 percent per year by value from 2015. By number and value, the decline in prepaid EBT card payments slowed growth in total prepaid debit card payments from 2015 to 2018. The average value of prepaid EBT card payments declined from $29 in 2015 to $26 in 2018.

Credit card payments accounted for 34.1 percent of all card payments in 2018 by number, up slightly from 33.2 percent in 2015. 6 Credit card payments totaled 44.7 billion with a value of $3.98 trillion in 2018, up from a total of 33.7 billion with a value of $3.05 trillion in 2015. These increases in the number and value of credit card payments from 2015 to 2018 correspond to growth rates by number and value of 9.9 percent per year and 9.3 percent per year, respectively. As with non-prepaid debit cards, credit card growth by both number and value accelerated from the previous three-year period. Since 2012, reflecting the slightly higher growth rate in the number of payments compared to the value of payments, the average value of credit card payments has steadily declined from $95 in 2012 to $91 in 2015 to $89 in 2018.

• General-purpose credit card payments accounted for 91.5 percent of all credit card payments in 2018 by number, down slightly from 92.1 percent in 2015. General-purpose credit card payments were 40.9 billion with a value of $3.64 trillion in 2018, reflecting growth of 9.7 percent per year by number and 9.1 percent per year by value from 2015. The average value of these payments decreased slightly from $90 in 2015 to $89 in 2018.
• Private-label credit card payments accounted for 8.5 percent of all credit card payments in 2018 by number, up from 7.9 percent in 2015. Private-label credit card payments increased to 3.8 billion with a value of $0.34 trillion in 2018, reflecting growth of 12.7 percent per year by number and 11.0 percent per year by value from 2015. Private-label credit card payments averaged $93 in 2015 and $89 in 2018, similar to the average values of general-purpose credit card payments in those years.

Remote General-Purpose Card Payments

The number of remote general-purpose card payments (hereafter, "remote card payments") grew 20.5 percent per year from 2015 to 2018, which was significantly higher than the growth rate of 5.8 percent per year for in-person general-purpose card payments (hereafter, "in-person card payments") over the same period. At the same time, the number of in-person card payments continued to exceed the number of remote card payments by a substantial margin over the 2015 to 2018 period ( figure 3 ). In 2018, the number of in-person card payments was 86.1 billion, up 13.4 billion from 2015, compared with 33.5 billion remote card payments in 2018, up 14.3 billion from 2015.

Figure 3. Trends and distribution of remote and in-person general-purpose card payments, by number, 2012–18

Note: Key identifies bars in order from bottom to top.

Even though a wide gap remained between the number of remote and in-person card payments in 2018, remote card payments had closed the gap in value with in-person card payments ( figure 4 ). From 2015 to 2018, the value of remote card payments increased 14.4 percent per year, a substantially higher growth rate than the 4.0 percent per year growth of in-person card payments over the same period. From 2012 to 2018, the increase in the total value of remote card payments was nearly four times the increase in the total value of in-person card payments. As a result, while the value of in-person card payments had risen to $3.30 trillion in 2018, the value of remote card payments in 2018 was nearly the same at $3.29 trillion.

Figure 4. Trends and distribution of remote and in-person general-purpose card payments, by value, 2012–18

To obtain information about the main sources of growth in remote card payments since 2015, the surveys requested an allocation of remote card payments to four categories: mail-/telephone-order, internet purchase (e-commerce), recurring/installment (e.g., bill pay), and other ( figure 5 ).

Figure 5. Trends in remote general-purpose card payments, by number and value, 2015–18

By number, e-commerce payments with cards were by far the largest category in both 2015 and 2018, representing 61.7 percent of all remote card payments in 2015 and 63.0 percent in 2018. After growing 21.3 percent per year from 2015 to 2018, the number of e-commerce payments with cards reached 21.1 billion in 2018. The number of recurring/installment payments with cards grew nearly as fast from 2015 to 2018, at 19.8 percent per year, yielding 5.8 billion payments in 2018 and making those payments the second largest by number among those four categories. The third largest category in 2018 by number was other remote card payments, which reached 3.9 billion in 2018. Finally, mail-/telephone-order card payments totaled 2.7 billion in both 2015 and 2018, dropping from 14.0 percent of all remote card payments in 2015 to 7.9 percent in 2018.

Despite the closing of the gap in value between in-person and remote card payments, the value of remote card payments grew relatively slowly from 2015 to 2018 compared to the number. Reflecting the slower growth in value, the average value of remote card payments declined from $114 in 2015 to $98 in 2018. This decline in the overall average value was driven by declines in the average values for the e-commerce and recurring/installment categories. In particular, the average value of e-commerce payments with cards declined from $101 in 2015 to $83 in 2018, while the average value of recurring/installment payments with cards declined from $68 to $60 over the same period. By contrast, the average value of mail-/telephone-order payments with cards increased over the period, rising from $224 in 2015 to $239 in 2018, while the average value for other remote card payments grew from $128 to $142 over the same period.

In-Person General-Purpose Card Payments

A notable development in recent years for in-person card payments in the United States has been the widespread issuance of chip-based EMV cards beginning in 2015 and the deployment of point-of-sale terminals that support chip-based payment technology. 7 In 2018, the number of such chip-authenticated card payments reached 48.8 billion, a substantial increase from the 1.4 billion in-person chip-authenticated card payments in 2015 and larger than the 37.3 billion in-person card payments without chip authentication in 2018 ( figure 6 ).

Figure 6. In-person chip and no chip, with PIN or without PIN, general-purpose card payments, by number and value, 2015–18

Note: In-person, with PIN or without PIN, general-purpose card payments data were not collected for 2016 and 2017. Key identifies bars in order from bottom to top.

Chip-authenticated card payments in the United States do not generally require the entry of a PIN, although many chip cards support entry of a PIN while using the chip. Increased use of either chips or PINs separately can increase the security of card payments, while the use of a chip and PIN together can further reduce the risk of third-party payments fraud. 8 In fact, the data show that in-person card payments in the United States have involved not only increasing use of chips but also both rising use of PINs and rising use of chips and PINs together. In particular, 26.3 billion in-person card payments were based on PIN authentication in 2018, compared with 16.9 billion in 2015, an increase of 9.4 billion over the three-year period. PIN-authenticated payments constituted 30.6 percent of all in-person card payments in 2018, up from 23.2 percent in 2015 ( figure 6 ). Moreover, 17.8 billion in-person card payments, constituting 20.7 percent of all in-person card payments in 2018, involved the use of a chip and PIN together, compared to just 135 million and a negligible percent in 2015.

Unlike remote card payments, the average value of in-person card payments changed little from 2015 to 2018, declining slightly from $40 to $38. Chip-authenticated card payments tended to be of higher average value ($44) compared to card payments without chip authentication ($31) in 2018. The average value of chip-authenticated payments was relatively high in 2015 ($68) during the initial phase of the EMV rollout in the United States. Among in-person card payments without chip authentication, those involving PIN authentication were slightly higher, on average ($31), than those not involving PIN-authentication ($30) in 2018. Among card payments with chip authentication, those also involving PIN authentication were for lower amounts, on average ($41), than those not involving PIN authentication ($46) in the same year.

Automated Clearinghouse Payments

Total ACH payments are estimated to have reached 28.5 billion with a value of $64.16 trillion in 2018, an increase of 4.6 billion and $12.08 trillion since 2015. Total ACH payments grew at an accelerated rate of 6.0 percent per year by number and 7.2 percent per year by value from 2015 to 2018, compared with 4.9 percent by number and 4.1 percent by value from 2012 to 2015. ACH payments accounted for 66.1 percent of the value of all noncash payments in 2018, up from 60.0 percent in 2015. By number, ACH payments were 16.4 percent of all noncash payments in 2018, down from 16.7 percent in 2015.

ACH Credit and Debit Transfers

Payments through the ACH system include both credit transfers and debit transfers. ACH credit transfers are payments for which the payer's depository institution "pushes" funds to the payee's depository institution, such as direct-deposit payroll payments. ACH debit transfers are payments for which the payee's depository institution "pulls" funds from the payer's depository institution, such as an insurance or mortgage payment drawn from an individual's account on a prearranged basis.

ACH credit transfers were 11.9 billion with a value of $40.87 trillion in 2018, an increase of 1.9 billion and $8.40 trillion since 2015. ACH credit transfers grew at a higher rate of 6.0 percent per year by number and 8.0 percent per year by value from 2015 to 2018, compared with 5.1 percent per year by number and 5.7 percent per year by value from 2012 to 2015. ACH debit transfers were 16.6 billion with a value of $23.28 trillion in 2018, an increase of 2.7 billion and $3.68 trillion since 2015. ACH debit transfers also grew at a higher rate of 6.1 percent per year by number and 5.9 percent per year by value from 2015 to 2018, compared with 4.8 percent per year by number and 1.7 percent per year by value from 2012 to 2015.

Network and On-Us ACH

Most ACH payments pass between depository institutions over the ACH network and are reported by the network operators. Some depository institutions also process ACH payments between their own customers internally, called in-house on-us payments or, for simplicity, on-us payments. 9

Network ACH payments reached 22.9 billion with a value of $51.25 trillion in 2018, an increase of 3.7 billion and $9.61 trillion since 2015. These payments grew at an increased rate of 6.0 percent per year by number and 7.2 percent per year by value from 2015 to 2018, compared with 4.9 percent per year by number and 4.1 percent per year by value from 2012 to 2015. On-us ACH payments are estimated to have been 5.6 billion by number, with a value of $12.90 trillion in 2018, an increase of 0.9 billion and $2.47 trillion since 2015. On-us ACH payments are estimated to have grown at a rate of 6.3 percent per year by number and 7.3 percent per year by value from 2015 to 2018. 10

Network and on-us ACH payments can be further broken down into credit and debit transfers ( figure 7 ). Network ACH credit transfers were 9.5 billion with a value of $33.42 trillion in 2018, an increase of 1.5 billion and $6.64 trillion since 2015. From 2015 to 2018, network ACH credit transfers grew at a rate of 5.8 percent per year by number and 7.7 percent per year by value. In 2018, network ACH debit transfers reached 13.4 billion with a value of $17.83 trillion, an increase of 2.2 billion and $2.97 trillion since 2015. These debit transfers grew at a rate of 6.1 percent per year by number and 6.3 percent per year by value from 2015 to 2018. On-us ACH credit transfers were 2.4 billion with a value of $7.45 trillion in 2018, an increase of 0.4 billion and $1.75 trillion since 2015. From 2015 to 2018, on-us ACH credit transfers grew at a rate of 6.6 percent per year by number and 9.4 percent per year by value. On-us ACH debit transfers were 3.2 billion with a value of $5.45 trillion in 2018, an increase of 0.5 billion and $0.71 trillion. These increases corresponded to growth of 6.1 percent per year by number and 4.8 percent per year by value from 2015 to 2018.

Figure 7. Network and on-us ACH credit transfers originated and debit transfers received, by number and value, 2003–18

Check payments, checks paid and checks written.

Check payments declined to 14.5 billion with a value of $25.80 trillion in 2018, a decrease of 3.6 billion and $3.39 trillion from 2015. From 2015 to 2018, check payments declined 7.2 percent per year by number and 4.0 percent per year by value. Although the rate of decline by number is higher than the decline of 2.8 percent per year from 2012 to 2015, it is in line with declines posted from 2003 to 2012. By value, changes in check payments have proven to be less stable than changes by number. In particular, value declined from 2015 to 2018, following an increase from 2012 to 2015. Previously, checks had declined from 2006 to 2012 after having increased from 2000 to 2006. The average value of check payments grew to $1,779 in 2018, compared with $1,609 in 2015 and $1,378 in 2012. The average value of check payments in 2000 was $945. Check payments accounted for 8.3 percent by number and 26.6 percent by value of core noncash payments in 2018, down from 58.8 percent by number and 67.4 percent by value in 2000.

Some checks are taken out of the check clearing process and converted to ACH payments, but the practice has declined since peaking around the time that electronic check-processing took hold. The sum of check payments and checks converted to ACH payments is equal to total checks written ( table B.1 ). Total checks written declined to 16.0 billion with a value of $26.20 trillion in 2018, a decrease of 4.2 billion and $3.48 trillion from 2015. The average value of checks written grew to $1,635 in 2018 from $1,468 in 2015.

Interbank and On-Us Checks

Check payments are composed of interbank and on-us check payments and exclude checks converted to ACH payments. 11 When a commercial check is deposited at a different depository institution than the paying depository institution—the one that holds the account against which the check was written—it is called an interbank check. Commercial checks that are deposited at the paying depository institution are called on-us checks. The number of interbank check payments fell to 11.0 billion with a value of $18.98 trillion in 2018, a decrease of 2.6 billion and $2.31 trillion from 2015 ( figure 8 ). From 2015 to 2018, interbank check payments declined 6.9 percent per year by number and 3.8 percent per year by value. On-us check payments fell to 3.5 billion with a value of $6.82 trillion in 2018, a decrease of 1.0 billion and $1.07 trillion from 2015. On-us check payments declined more rapidly than interbank check payments at 8.2 percent per year by number and 4.8 percent per year by value from 2015 to 2018.

Figure 8. Trends in checks written, by number and value, 2000–18

Automated teller machine cash withdrawals.

While ATM cash withdrawals—estimated in each triennial study since 2003—hovered just below 6.0 billion through 2012, the number of withdrawals had dropped in 2015 and 2018. The number of ATM cash withdrawals fell to 5.1 billion in 2018, a slight decline of 0.1 billion since 2015, while the value grew to $0.80 trillion, an increase of $0.03 trillion from 2015 ( figure 9 ). ATM cash withdrawals fell at a rate of 0.9 percent per year by number from 2015 to 2018, while increasing at a rate of 1.5 percent per year by value. The average value of ATM cash withdrawals was $156 in 2018, an increase from $146 in 2015.

On-us ATM cash withdrawals, made from ATMs owned by the account holder's depository institution, were 3.4 billion by number with a value of $0.58 trillion in 2018. While the number of on-us ATM cash withdrawals remained relatively stable, the value increased throughout 2003 to 2018, and specifically grew 3.0 percent per year from 2015 to 2018. Foreign ATM cash withdrawals—those made from ATMs not owned by the account holder's depository institution—fell to 1.7 billion by number with a value of $0.21 trillion in 2018, a decrease of 0.2 billion and $0.02 trillion from 2015. Foreign ATM cash withdrawals declined at a rate of 3.7 percent per year by number and 2.3 percent per year by value from 2015 to 2018. The shares of on-us ATM cash withdrawals in total ATM cash withdrawals have increased from 64.0 percent by number and 69.9 percent by value in 2015 to 67.0 percent by number and 73.1 percent by value in 2018.

Figure 9. On-us and foreign ATM cash withdrawals, by number and value, 2003–18

Note: On-us ATM cash withdrawals are from accounts held by the ATM sponsor, while foreign ATM cash withdrawals are (a term of art for) from accounts held by an institution other than the ATM sponsor. Foreign ATM cash withdrawals often include transaction fees, while on-us ATM cash withdrawals often do not.

Appendix A: About the Federal Reserve Payments Study

The Federal Payments Study (FRPS) is a collaborative effort by staff members at the Federal Reserve Bank of Atlanta and the Board of Governors of the Federal Reserve System to track and document developments in the U.S. payments system through the collection of quantitative survey data. Estimates of payments activity enable policymakers, the payments industry, and the public to better understand payment trends and help to inform strategies to foster further improvements in the payments infrastructure.

The estimates reported in this brief are based on information gathered in two survey efforts:

• Depository and Financial Institutions Payments Survey (DFIPS)
• Networks, Processors, and Issuers Payments Surveys (NPIPS)

Estimates of aggregate totals and trends are developed from individual institutions' response data provided in the surveys, which remain confidential.

2019 Depository and Financial Institutions Payments Survey

The 2019 DFIPS, administered with the help of the GCI Analytics office of McKinsey & Company, collected the number and value of noncash payments, cash withdrawals, and deposits posted to customer accounts and unauthorized transactions (third-party fraud) that took place during calendar year 2018. Noncash payments include transactions by check, ACH, wire transfer, debit card (including non-prepaid and prepaid), credit card, and alternative payment initiation methods and services. 12

A nationally representative, stratified random sample of 3,800 depository institutions, including some credit card banks, in the United States was drawn. The largest depository institutions were sampled at a higher rate in an effort to count as many transactions as possible and reduce the error introduced by the estimation process. The sample included commercial banks, savings institutions, and credit unions. Estimates for the full population of depository institutions were based on separate ratio estimators constructed for each size and institution-type stratum. Surveys were returned by 1,381 depository institutions.

A Note about In-House On-Us ACH Measurement

As discussed in past reports, the nature of internal ACH processing methods complicate accurate measurement because internal databases of depository institutions often include very large value offset ACH transfers that inflate the estimates for the value of in-house on-us ACH payments. Depository institutions have varying methods of tracking internal ACH payments. Since 2012, the structure of the triennial surveys that collect these data has changed several times to try to improve accuracy, which nevertheless complicates attempts to consistently estimate the number and value of in-house on-us ACH payments.

In order to construct consistent estimates for this brief, ratios of total ACH payments to network ACH payments by number were calculated as the average of estimated ratios from the separate surveys. The average ratios were calculated for ACH credit transfers (1.29) and ACH debit transfers (1.25) separately, and were used to derive in-house on-us ACH payments for each year. Then the average value of network ACH payments was used in combination with an estimate of the total number of in-house on-us ACH payments to calculate the value of in-house on-us ACH credit and debit transfers separately, an approach used to report total ACH payments prior to the 2013 study.

2019 Networks, Processors, and Issuers Payments Surveys

The 2019 NPIPS, administered with the help of Blueflame Consulting, estimated the number and value of electronic payments in the United States for calendar year 2018. Data were collected through surveys sent to the full population of the relevant payment organizations, such as card networks, issuers and processors of card and alternative payment methods and services. Aggregate estimates were constructed by totaling data for the individual organizations. In cases of nonresponse or missing data, estimates for individual organizations were constructed from available information. Surveys were returned by 55 payment organizations that process, clear, or settle core noncash payments. Relevant for future work, surveys were also returned by 90 organizations involved in alternative payment methods and systems, as well as 131 transit system operators.

Appendix B: Tables

Table b.1. noncash payments, 2012, 2015, and 2018.

Noncash payment type	2012			2015			2018
	Number (billions)	Value ($ trillions)	Average ($)	Number (billions)	Value ($ trillions)	Average ($)	Number (billions)	Value ($ trillions)	Average ($)
Total	123.9	78.01	630	143.6	86.78	604	174.2	97.04	557
Cards	83.4	4.65	56	101.5	5.52	54	131.2	7.08	54
Debit cards	56.5	2.10	37	67.8	2.47	36	86.4	3.10	36
Non-prepaid	47.3	1.87	40	56.6	2.18	38	72.7	2.75	38
Prepaid	9.3	0.23	25	11.2	0.29	26	13.8	0.35	25
General purpose	3.1	0.11	35	4.3	0.15	35	6.0	0.19	32
Private label	3.7	0.05	13	4.4	0.07	16	5.5	0.10	18
Electronic benefits transfer (EBT)	2.5	0.07	30	2.6	0.08	29	2.2	0.06	26
Credit cards	26.8	2.55	95	33.7	3.05	91	44.7	3.98	89
General purpose	24.4	2.27	93	31.0	2.80	90	40.9	3.64	89
Private label	2.5	0.28	112	2.7	0.25	93	3.8	0.34	89
Automated clearinghouse (ACH)	20.7	46.15	2,225	23.9	52.08	2,177	28.5	64.16	2,250
Credit transfers	8.6	27.51	3,194	10.0	32.48	3,253	11.9	40.87	3,441
Debit transfers	12.1	18.65	1,538	13.9	19.60	1,406	16.6	23.28	1,399
Network	16.7	36.88	2,205	19.3	41.64	2,159	22.9	51.25	2,234
Credit transfers	6.9	22.64	3,259	8.0	26.78	3,333	9.5	33.42	3,512
Debit transfers	9.8	14.24	1,456	11.3	14.86	1,321	13.4	17.83	1,328
On-us	4.0	9.28	2,311	4.6	10.44	2,249	5.6	12.90	2,315
Credit transfers	1.7	4.86	2,920	2.0	5.70	2,922	2.4	7.45	3,154
Debit transfers	2.3	4.41	1,880	2.7	4.74	1,761	3.2	5.45	1,697
Checks	19.7	27.21	1,378	18.1	29.18	1,609	14.5	25.80	1,779
Interbank	14.1	17.44	1,234	13.6	21.29	1,564	11.0	18.98	1,725
On-us	5.6	9.77	1,740	4.5	7.90	1,746	3.5	6.82	1,949
Additional estimates
Checks written	22.5	27.83	1,239	20.2	29.68	1,468	16.0	26.20	1,635
Checks converted to ACH	2.7	0.62	227	2.1	0.50	238	1.5	0.40	263
ATM cash withdrawals	5.8	0.69	118	5.2	0.76	146	5.1	0.80	156

Note: General-purpose card figures are defined as net, authorized, and settled. Figures may not sum because of rounding. Checks written is the sum of "Checks" and "Checks converted to ACH," which uses the check as a source document to initiate the ACH payment.

Table B.2. Changes and rates of change in noncash payments, 2012, 2015, and 2018

Noncash payment type	2012–15 Change		2012–15 CAGR		2015–18 Change		2015–18 CAGR
	Number (billions)	Value ($ trillions)	Number (percent)	Value (percent)	Number (billions)	Value ($ trillions)	Number (percent)	Value (percent)
Total	19.7	8.77	5.1	3.6	30.6	10.25	6.7	3.8
Cards	18.2	0.87	6.8	5.9	29.7	1.56	8.9	8.6
Debit cards	11.3	0.37	6.3	5.5	18.6	0.63	8.4	7.8
Non-prepaid	9.4	0.31	6.2	5.2	16.0	0.57	8.7	8.1
Prepaid	2.0	0.06	6.6	8.2	2.6	0.06	7.1	5.9
General purpose	1.1	0.04	10.7	10.5	1.8	0.04	12.3	8.7
Private label	0.7	0.02	6.1	14.2	1.2	0.03	8.3	12.5
Electronic benefits transfer (EBT)	0.1	0.00	1.7	0.2	-0.4	-0.02	-5.2	-7.8
Credit cards	6.8	0.51	7.9	6.2	11.1	0.93	9.9	9.3
General purpose	6.6	0.53	8.4	7.3	9.9	0.84	9.7	9.1
Private label	0.2	-0.03	2.8	-3.5	1.2	0.09	12.7	11.0
Automated clearinghouse (ACH)	3.2	5.92	4.9	4.1	4.6	12.08	6.0	7.2
Credit transfers	1.4	4.97	5.1	5.7	1.9	8.40	6.0	8.0
Debit transfers	1.8	0.95	4.8	1.7	2.7	3.68	6.1	5.9
Network	2.6	4.76	4.9	4.1	3.7	9.61	6.0	7.2
Credit transfers	1.1	4.13	5.0	5.7	1.5	6.64	5.8	7.7
Debit transfers	1.5	0.63	4.8	1.4	2.2	2.97	6.1	6.3
On-us	0.6	1.16	5.0	4.0	0.9	2.47	6.3	7.3
Credit transfers	0.3	0.84	5.4	5.4	0.4	1.75	6.6	9.4
Debit transfers	0.3	0.33	4.7	2.4	0.5	0.71	6.1	4.8
Checks	-1.6	1.97	-2.8	2.4	-3.6	-3.39	-7.2	-4.0
Interbank	-0.5	3.85	-1.2	6.9	-2.6	-2.31	-6.9	-3.8
On-us	-1.1	-1.88	-7.0	-6.9	-1.0	-1.07	-8.2	-4.8
Additional estimates
Checks written	-2.2	1.85	-3.4	2.2	-4.2	-3.48	-7.5	-4.1
Checks converted to ACH	-0.6	-0.12	-8.5	-7.0	-0.6	-0.09	-9.9	-6.8
ATM cash withdrawals	-0.6	0.08	-3.4	3.6	-0.1	0.03	-0.9	1.5

Note: General-purpose card figures are defined as net, authorized, and settled. Figures may not sum because of rounding. CAGR is compound annual growth rate. Checks written is the sum of "Checks" and "Checks converted to ACH," which uses the check as a source document to initiate the ACH payment.

Geoffrey Gerdes, Claire Greene, Xuemei (May) Liu, and Emily Massaro prepared this brief, with excellent research assistance from Ambika Nair and Zach Proom. Staff members at the Federal Reserve Bank of Atlanta and the Board of Governors of the Federal Reserve System who contributed to this report include Nancy Donahue, Lisa Gillispie, Mary Kepler, Doug King, Susan Krupkowski, Ellen Levy, Dave Lott, Mark Manuszak, David Mills, Laura Reiter, Stephanie Scuiletti, Susan Stawick, Catherine Thaliath, Jessica Washington, and Julius Weyman. The authors take responsibility for any errors.

If you have questions about the FRPS or this brief, please email [email protected] .

Data from this and prior years are available at https://www.federalreserve.gov/paymentsystems/fr-payments-study.htm .

 1. While the study does not collect information on the number and value of cash payments, it does collect information on the number and value of various kinds of cash withdrawals from and deposits to the banking system.  Return to text

 2. Previous iterations of the triennial study yielded estimates of national totals for card, check, and ACH payments, as well as ATM cash withdrawals, for every three years from 2000 to 2015. Supplementary surveys, conducted in 2017 and 2018, provided national totals for card payments in 2016 and 2017 but provided only partial data on ACH payments, check payments, and ATM cash withdrawals. Previous data and reports are available at https://www.federalreserve.gov/paymentsystems/frps_previous.htm .  Return to text

 3. The Federal Reserve System appreciates the support of the payments and financial services industry in this effort, particularly the essential support of institutions and organizations that responded to the surveys.  Return to text

 4. All reported values are in nominal U.S. dollars.  Return to text

 5. For purposes of the study, prepaid debit cards comprise general-purpose prepaid debit cards, which share the same networks as non-prepaid debit cards, private-label prepaid debit cards used on proprietary networks for purchases at specific merchants, and electronic benefits transfer (EBT) cards used to provide government assistance, predominantly the Supplemental Nutritional Assistance Program (SNAP) to low-income families.  Return to text

 6. For purposes of the study, credit cards are composed of general-purpose credit cards and private-label credit cards used on proprietary networks for purchases at specific merchants.  Return to text

 7. Chip-authenticated payments include both those that use the EMV specification and those that do not. Chip-authenticated payments can be made with debit or credit cards or tokens that contain computer microchips or with digital wallets on mobile devices. EMV is a trademark of EMVCo, the organization that sets EMV specifications. Chip card adoption is discussed in more detail in Federal Reserve System, The 2016 Federal Reserve Payments Study (Washington: Federal Reserve Board, December 2016), www.federalreserve.gov/paymentsystems/2016-payment-study.htm; Federal Reserve System, The Federal Reserve Payment Study: 2017 Annual Supplement (Washington: Federal Reserve Board, December 2017), www.federalreserve.gov/paymentsystems/2017-December-The-Federal-Reserve-Payments-Study.htm ; and Federal Reserve System, The Federal Reserve Payment Study: 2018 Annual Supplement (Washington: Federal Reserve Board, December 2018), https://www.federalreserve.gov/paymentsystems/2018-December-The-Federal-Reserve-Payments-Study.htm .  Return to text

 8. Additional information on third-party payments fraud is presented in Federal Reserve System, Changes in U.S. Payments Fraud from 2012 to 2016: Evidence from the Federal Reserve Payments Study (Washington: Federal Reserve Board, October 2018), https://www.federalreserve.gov/publications/files/changes-in-us-payments-fraud-from-2012-to-2016-20181016.pdf .  Return to text

 9. Total network ACH payments in this report are estimated from data provided by the ACH network operators. In some cases, on-us payments are not processed in house and, instead, are included in files submitted to the ACH network operators. These payments are then returned to the depository institution that submitted them; such payments are included in the network ACH estimates. A negligible number of ACH payments are cleared and settled bilaterally between two depository institutions through a process called direct exchange.  Return to text

 10. Estimates of on-us ACH payments over the 2012 to 2018 period are likely to be revised after further data analysis. See the section A Note about In-House On-Us ACH Measurement in Appendix A: About the Federal Reserve Payments Study.  Return to text

 11. Once converted, the check is considered a "source document" for the ACH payment.  Return to text

 12. Additional detailed data from the surveys are expected be released later.  Return to text

• /paymentsystems/2019-December-The-Federal-Reserve-Payments-Study-accessible.htm

Working Papers

Tracing bank runs in real time.

Marco Cipriani , Thomas M. Eisenbach and Anna Kovner

We use high-frequency interbank payments data to trace deposit flows in March 2023 and identify twenty-two banks that suffered a run, significantly more than the two that failed but fewer than the number that experienced large negative stock returns. The runs were driven by large (institutional) depositors, rather than many small (retail) depositors. While the runs were related to weak fundamentals, we find evidence for the importance of coordination because run banks were disproportionately publicly traded and many banks with similarly bad fundamentals did not suffer a run. Banks that survived a run did so by borrowing new funds and then raising deposit rates, not by selling liquid securities.

DOI: https://doi.org/10.21144/wp24-10

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New Research from Waystar and Modern Healthcare Reveals AI’s Transformative Impact on Healthcare Payments

Leading health systems and providers experience increased  productivity, revenue, and satisfaction with AI adoption 

75% report positive ROI from AI in healthcare payments;  90% plan to boost AI investments in the near future

LEHI, Utah and LOUISVILLE, Ky., September 24, 2024 — Waystar Holding Corp. (Nasdaq: WAY), a provider of leading healthcare payment software, and Modern Healthcare, today announced new research that reveals how artificial intelligence (AI) transforms healthcare payments. The study demonstrates how AI, including generative AI, effectively addresses major challenges in the healthcare industry, driving notable improvements in financial and operational outcomes.  

The research provides insights into how leading healthcare systems, hospitals, and medical practices harness the power of AI to tackle administrative burdens and streamline labor-intensive processes. It also identifies opportunities to maximize AI’s benefits while overcoming potential barriers to adoption. The study surveyed over 60 senior executives and finance leaders at prominent healthcare organizations.   

Key findings from the study include:  

• Strong ROI from AI implementation in healthcare payments: A substantial majority of respondents ( 75% ) reported that AI has already delivered a positive return on investment for their organizations, underscoring its value in healthcare payments.  
• Significant benefits across the software platform: AI adoption has led to measurable improvements in operations, including increased staff productivity, higher revenue, reduced human error, lower operational costs, and improved patient satisfaction.  
• Growing AI adoption with future investment plans: Nearly three-quarters of respondents use AI for specific revenue cycle tasks, though overall platform adoption is only at 3 percent. This gap underscores the significant opportunity ahead. Yet, 90% plan to invest in AI in the near future, most within the next 12 months, a trend poised to propel the growth of the healthcare payments software market, increasing its value from the $15 billion it is today.  
• Generative AI gaining traction: 66% of respondents foresee investing in generative AI over the next 12-18 months. They expect key improvement areas such as denial and appeal management, coding, claim management, and reviews.  

“At Waystar True North, we showcased the power of harnessing AI, including Generative AI in the Waystar Innovation Lab™ to hundreds of top healthcare leaders across the nation,” said Matt Hawkins, Chief Executive Officer at Waystar. “Our research and ongoing discussions with healthcare leaders reveal a clear trend: Generative AI has immense potential to simplify healthcare payments. We are grateful to be a leader in innovation with a core focus on delivering demonstrable ROI across the Waystar software platform.”  

As healthcare systems, hospitals, and medical practices grapple with administrative burdens, patient expectations, and policy changes – compounded by wasteful spending and outdated technology – AI offers a powerful opportunity to enhance revenue cycles, automate manual tasks, and enable providers to focus more on patient care.  

The findings were explored at Waystar’s True North conference , which brought together executives from large health systems and hospitals to small medical practices. Speakers discussed key topics at the heart of the Waystar and Modern Healthcare report, highlighting the increasing adoption of AI and the acceleration of innovations reshaping healthcare payments.  

Access the full report here .  

About Waystar  

Waystar’s mission-critical software is purpose-built to simplify healthcare payments so providers can prioritize patient care and optimize their financial performance. Waystar serves approximately 30,000 clients, representing over 1 million distinct providers, including 18 of 22 institutions on the U.S. News Best Hospitals list. Waystar’s enterprise-grade platform annually processes over 5 billion healthcare payment transactions, including over $1.2 trillion in annual gross claims and spanning approximately 50% of U.S. patients. Waystar strives to transform healthcare payments so providers can focus on what matters most: their patients and communities. Discover the way forward at  waystar.com .

Media Contact Kristin Lee [email protected]  

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Tuesday , September 24, 2024

The net worth of your network: How connections lead to money

The net worth of your network: how connections lead to money .

By The Currency editors

Six in 10 Americans believe that the strength of their connections is key to success, from career advancement to pay and promotions, according to Empower's new research " The Network Effect ." Half of people (50%) say it would be naïve not to take advantage of personal connections.

How is each generation using their network to find success and money opportunities?

Younger generations: Job hopping and hardships

More than half of Millennials (55%) and Gen Z (54%) believe that they have had it financially harder than other generations, according to Empower research-more than double that of Baby Boomers (24%) and substantially higher than Gen Xers (36%) who say the same.

Millennials do have a point: This generation faced substantial headwinds, including the 2008 financial crisis when many were entering the workforce, volatility brought on by the pandemic, as well as sky-high housing, and higher education costs. Gen Zers also had a rough start to their professional lives, which coincided with the Covid-19 pandemic. 1

1 in 2 Millennials and Gen Zers believe that they have it harder than other generations, more than double that of Baby Boomers

And in today's economy, even though they are sometimes categorized as job hoppers, 2 some Millennials and Gen Zers are struggling. Thirty percent of them say that they are working lower-paying jobs right now due to job cuts. The same is true for only 13% of Baby Boomers and 21% of Gen Xers.

But there is more to the story: A third of Gen Zers and 32% of Millennials admit that they spend more than they make trying to keep up with others (versus just 13% of Baby Boomers and 19% of Gen Xers).

Family Ties: Every generation of adult children gets more financial support from their parents

90% of baby boomers, the highest percentage among generations, strive for financial independence.

More than 1 in 5 (21%) have received financial help for education from their network. Though, nearly a third say that due to their career choices (e.g., lack of a degree, low-paying jobs) they need to financially rely on others (27% overall, 38% Gen Z, Millennials). Some 41% of younger generations admit that they have not saved enough and need to rely on family or friends to make ends meet.

Nearly a third of people admit to receiving financial assistance from their parents after the age of 18 (30%): 37% of Baby Boomers received financial support from their parents for things like housing, education, and food, compared to 53% of Millennials and Gen Zers and 47% of Gen Xers who received similar assistance.

In many cases, those who are not fully self-sufficient feel self-conscious about it: 58% of Millennials and 49% of Gen Zers feel embarrassed about having to rely on others for financial help. They needn't feel that way: When it comes to support more than half across all generations agree that family members and close friends need to help each other financially.

And while every generation strives for financial independence and paving one's own path (79%), that desire is strongest among Baby Boomers at 90%, followed by Millennials at 79%, Gen Xers at 76% and Gen Zers at 65%.

Those who rely on assistance vow they are doing everything they can to stop needing financial help (57%). Will they be able to live independently? One positive observation: Financial education that adult children get from their parents has gone up - from 37% of Baby Boomers who got such education from their parents to 51% of Gen Zers.

Working it: Getting a job is about "who you know" and not just "what you know"

40% of millennials wouldn’t have their current job without their personal connections   .

Forty percent of Millennials say that they wouldn't have the job they currently hold without their personal connections, and 40% believe they wouldn't make their current salary. That also makes Millennials the highest beneficiaries of their networks in terms of jobs and promotions among all generations.

Better-paying jobs are more likely to have been landed with personal connections:

• 37% of those who make at least $100,000 say that they would not have their current job without their personal connections, compared to 28% of those who make less than $50,000 a year.
• 38% of those making at least $100,000 say they wouldn't make their salaries without their network, compared to 26% of those who make under $50,000.

Some 75% say it's important to use your network to help others, and half of Americans say they've actively helped others get a job (53% overall, 61% Millennials). Two-thirds of Americans say paying it forward to others in this way increases their happiness . Six in 10 Americans have paid it forward to strangers in small ways, too, like paying for the person behind them in the drive thru.

No man is an island, and families and friends are here to help each other. But with every generation the need for financial help from others is increasing. Personal networks are a great tool in the arsenal, but not a crutch. Making it on one's own — still the desire of a majority among all generations —  will take some smart lifestyle choices and financial education.

Get financially happy.

Put your money to work for life and play.

Methodology:

Empower's "The Network Effect" study is based on online survey responses from 2,200 Americans ages 18+ fielded by Morning Consult between August 5-7, 2024. The survey is weighted to be nationally representative of U.S. adults (aged 18+).

1 The Washington Post, "Millennials had it bad financially, but Gen Z may have it worse" September 13, 2024. https://www.washingtonpost.com/business/2024/06/22/gen-z-millennials-debt-inflation/

2 Gallup. "Millennials: The Job-Hopping Generation" September 13, 2024. https://www.gallup.com/workplace/231587/millennials-job-hopping-generation.aspx

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Personal independence payments (PIP) among people who access mental health services

Dr sarah ledden and dr sharon stevelink.

24 September 2024

Earlier this year under the Conservative government a Green paper opened up a consultation on the future of Personal Independence Payment (PIP) - a welfare benefit claimed by many people with mental health and neurodivergent conditions as well as people with physical health conditions. Researchers from King’s College London investigated how this benefit is received by people who are accessing mental health services and, together with members of a patient and public involvement and engagement group who advise on the project, have written a blog to explain their latest findings.

The Personal Independence Payment (PIP) is a welfare benefit intended to provide financial support to people with long-term health conditions or disabilities.

In April 2024 the last Government released the Green paper on Modernising Support for Independent Living , opening up a consultation on the future of PIP. This paper considers changes to the assessment process, eligibility for PIP, what types of support should be provided through PIP, and explores alternative supports to cash payments (e.g. vouchers or therapy sessions).

The foreword to the consultation cited that ‘the clinical case mix has evolved in line with broader societal changes including many more people applying for disability benefits with mental health and neurodivergent conditions than when PIP was first introduced’ and there have been calls for more precision around the type and severity of mental health conditions that should be eligible for PIP. Although there has been a change in government since then, the consultation closed on July 22nd . It is unclear if the new government will consider changes to PIP, and how they will use the contributions to this consultation to inform the future of PIP.

Before this Green paper was launched our research group was already investigating the relationships between receipt of welfare benefits and different aspects of mental health and illness through an innovative linkage between data from mental health services and data from the Department for Work and Pensions . We now have our first set of results which is around PIP and provides insights into who is claiming this benefit and patterns over time.

What is PIP?

PIP was introduced in 2013, to replace Disability Living Allowance (DLA) as the new benefit intended to provide regular financial contributions to adults aged 16 to 64 with long-term health conditions or disability to help with some of the additional costs caused by their condition. PIP is a non-means tested benefit. This means that anyone with a long-term health condition or disability is eligible to apply for PIP regardless of their income or financial situation. PIP is not related to employment, and people are able to both work and receive PIP if they are able to do so. 3.3 million people across England and Wales claimed PIP in January 2024.

Our research on PIP receipt in mental health service users

Our team is interested in understanding how benefits are received in people who are accessing mental health services. We have successfully linked over 400,000 mental healthcare records from people accessing South London and Maudsley NHS Foundation Trust with benefits records from the Department of Work and Pensions. We will use this data to answer important research questions around work, benefits, and mental health. In our most recent study, we looked at how PIP is received among people who access mental health services.

What does our data tell us about PIP in people who access mental health services?

We included 143,714 adults who had linked mental healthcare and benefits data in our study. Everyone included was of working age (18-66 years) and had accessed South London and Maudsley mental health services between 2007 and 2019.

Approximately 1 in 4 people accessing mental health services received PIP

We found that 25.8 per cent of people who accessed South London and Maudsley mental health services had received PIP between 2013-2019. For our study, this totalled 37,120 people. In 2019, 23.6 per cent of our sample received PIP. We know that nationally around 6 per cent of all working-age adults receive disability benefits (either PIP or DLA). Our data indicates that people who access mental health services are four times more likely to receive these benefits.

Receipt of PIP increased over time

As expected, due to the rollout of PIP from 2013, we saw a sustained increase in amount of people accessing mental healthcare services who received PIP over time. In 2013 – the first year that PIP was introduced – only 1.4 per cent of our sample received PIP, and as can be seen in the graph below this continued to grow every year to 23.6% in 2019.

It should be noted that although people who received Disability Living Allowance are expected to all move to PIP, this process of changing people’s benefits from DLA to PIP (known as ‘migration’) is still ongoing. This means that on top of the people receiving PIP, there are also an extra 13,847 people in our sample who received DLA as a support for their long-term health condition or disability. The graph below shows the changes in both DLA and PIP receipt in our sample from 2007 to 2019.

Number of patients who received PIP (irrespective of type of PIP) or DLA (irrespective of type of DLA) by calendar year (N=143,714), data covering 2013-2019

PIP receipt differed across psychiatric diagnosis groups

We also looked at differences in how PIP was received across different psychiatric diagnosis groups. This was done by considering all those people who received PIP and had used mental healthcare services and then comparing those who did have a psychiatric diagnosis to those with no psychiatric diagnosis on their record. We found that:

• People with an intellectual disability diagnosis were 5 times more likely to receive PIP than those without a psychiatric diagnosis.
• People with a personality disorder diagnosis were 3 times more likely to receive PIP.
• People with a diagnosis of schizophrenia or psychosis-related disorders were 2.8 times more likely to receive PIP.
• People with a severe mood disorder diagnosis, such as bipolar affective disorder or major depressive disorder, and people with anxiety-related diagnoses were 1.8 and 1.4 times more likely to receive PIP, respectively.
• People who had diagnoses classed as ‘other diagnosis’, including things like eating disorders, perinatal psychiatric disorders, and ‘unspecified mental illness’, were less likely to receive PIP.

We saw differences in PIP receipt for gender, age, ethnicity, and deprivation

• Women were slightly more likely to receive PIP than men.
• The likelihood of receiving PIP increased with age, particularly for those aged over 35 years.
• Compared to people from a White background, those from a Black background and mixed/multiple ethnic and racial group were slightly more likely to receive PIP. Those from an Asian/Asian British background were less likely to receive PIP compared to those from a White background.
• People living in more deprived areas were more likely to receive PIP than people living in areas with the lowest deprivation.

How our data can inform welfare reform and policy decisions

Many of the recent announcements about changes to the welfare system have explicitly discussed the increase of mental health related claims. Our data provides a unique and detailed insight into how the mental health and benefits system interact with one another, and can help identify which groups of people may be in most need of support. Any major changes to the benefits system that will affect people with mental health conditions should carefully consider the evidence around the impact of these decisions. We are using our data to further gain insights into PIP and other benefits claimed by people accessing mental healthcare services.

Stevelink SAM, Bakolis I, Dorrington S, et al. Personal independence payments among people who access mental health services: results from a novel data linkage .  BJPsych Open . 2024;10(5):e150. doi:10.1192/bjo.2024.68 

In this story

Sarah Ledden

Research Associate

Sharon Stevelink

Reader in Epidemiology

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Global payments 2021: Transformation amid turbulent undercurrents

Undoubtedly, 2020 was a tumultuous year on many levels. Payments was no exception—the sector experienced its first revenue contraction in 11 years, a consequence of the economic slowdown that accompanied the global health crisis  of COVID-19. Still, government and regulatory measures such as fiscal and monetary stimulus held the decline below the 7 percent we projected in last year’s report. 1 Philip Bruno, Olivier Denecker, and Marc Niederkorn, “ Accelerating winds of change in global payments ,” October 2020, McKinsey.com. At the same time, the continued digitization of commercial and consumer transactions contributed even greater upward momentum than expected.

Global payment revenues totaled $1.9 trillion in 2020, a 5 percent decline from 2019 (Exhibit 1), as compared to the 7 percent growth rate observed between 2014 and 2019. This result seems fairly intuitive on the surface; a granular analysis, however, reveals a series of often offsetting trends. Overall, the payments industry proved remarkably resilient to drastic economic changes even as many economies spent significant portions of the year in lockdown.

Looking forward, we see a handful of primary drivers influencing the payments revenue trajectory. On the one hand, continued cash displacement and a return to global economic growth will accelerate existing upward trends in the share and number of electronic transactions. On the other, interest margins will likely remain muted. Sustained softness in this key topline contributor will create greater incentive for payments players to pursue new fee-driven revenue sources and to expand beyond their traditional focus to adjacent areas such as commerce facilitation and identity services.

Given the above assumptions we expect global payments revenues to quickly return to their long-term 6 to 7 percent growth trajectory, recouping 2020’s declines in 2021 and reaching roughly $2.5 trillion by 2025. More importantly, however, as “payments” become further absorbed into commercial and consumer commerce journeys, established payments providers will gain access to adjacent opportunities as large as the core payments revenue pool. Of course, an opportunity of this magnitude draws attention—tech firms and ecosystem competitors are already focusing on these attractive (and often less regulated) elements of the payments value chain, rather than traditional interchange, acquiring, and transaction fees linked to payment flows.

Following a brief review of 2020 results and preliminary snapshot of 2021’s projected outcome, we will explore these opportunities in greater detail.

2020–21: A period of transition

The overall 5 percent decline in payment revenues is composed of divergent regional trends: Asia–Pacific, which has consistently outpaced other regions in payments revenue growth over the past decade, registered a 6 percent pullback in 2020, while Latin America’s 8 percent decline was the steepest of all regions. Europe, Middle East, and Africa (EMEA) and North America experienced revenue declines of 3 percent and 5 percent, respectively, mostly driven by continued reduction of net interest margins (NIMs) in EMEA and contracting credit card balances in North America.

The global contribution of net interest income (NII) to payments revenue has declined steadily from 51 percent in 2010 to 46 percent in 2020. Over the past year, a 31-basis-point contraction in global interest margins (compared to a decline of 25 bps predicted last fall) reduced payments revenue by $66 billion—two-thirds the total global net decline.

Proportionally, the impact was felt even more sharply in EMEA, which traditionally relies more heavily on NII, and endured an absolute decline of $42 billion over the past decade (Exhibit 2). Some banks have begun offsetting the interest revenue loss through higher account maintenance fees, while negative interest rates on accounts have materialized in some European markets—mostly on corporate accounts but increasingly on large retail deposits as well.

Cross-border payments, a natural casualty of reduced travel and global supply chain challenges, accounted for the remainder of the revenue decline. By contrast, the explosion in e-commerce and reduction in cash usage helped minimize the decline in domestic transaction fee income.

We expect pressure on both fee and processing margins to continue in many regions, while recovery in interest margins is expected to be slow and moderate at best. These combined forces disproportionally affect incumbent players reliant on traditional revenue streams, such as card issuers and banks holding significant commercial and consumer deposit balances, and thus spur a need to rethink payments revenue models and identify alternative paths to value.

As might be expected given 2021’s uneven global economic recovery, payments trends are showing similar disparity by country and region; for instance, revenues in Asia-Pacific and Latin America are expected to grow in the 9 to 11 percent range, compared to EMEA and North America at 4 to 6 percent. In aggregate, a likely solid increase in 2021 should leave global payments revenues equivalent to the 2019 result while setting the stage for a broad-based recovery. From that point, we forecast five-year revenue growth rates roughly on par with those generated in the five years preceding the pandemic—excluding the realization of additional revenue sources discussed below.

Enduring shifts in behavior

The pandemic reinforced major shifts in payments behavior: declining cash usage, migration from in-store to online commerce, adoption of instant payments. These shifts create new opportunities for payments players; however, it is unclear which are permanent and which are likely to revert—at least partially—to prior trajectories as economies reopen. Nonetheless, the long-term dynamics seem clear.

Cash payments declined by 16 percent globally in 2020, performing in line with the projections we made last fall for most large countries (Brazil 26 percent decline, United States 24 percent decline, United Kingdom 8 percent decline). Although the pandemic-driven temporary shuttering of many commercial venues was the primary trigger in this dramatic shift, other actions (such as countries like Argentina, Poland, and Thailand increasing ATM withdrawal fees, and the continued downsizing of ATM networks in Europe) reinforced and accelerated behavioral changes already under way. We expect cash usage to rebound to some extent in 2021, due to a partial return to past behaviors, fewer lockdowns, and a broader economic recovery, but evidence indicates that roughly two-thirds of the decrease is permanent.

The reduction in cash demand is leading to increasing unit servicing costs for its distribution and collection, prompting banks to review ATM footprints and rethink their cash cycle management. One response has been growth in ATM sharing between network banks and greater outsourcing of ATM servicing to specialized cash-in-transit (CIT) players—first observed in Northern Europe and now in Latin America (for example, a joint venture between Euronet and Prosegur Cash to provide comprehensive ATM outsourcing services).

Regulators in countries with dramatic reductions in cash usage are preparing strategies to ensure continued availability of central bank currency and access to resilient and free payments systems for all—including the un- and underbanked. The situation is driving heightened interest in central bank digital currencies (CBDCs), as discussed in chapter 2, “ CBDC and stablecoins: Early coexistence on an uncertain road .”

Retailers, particularly digital commerce marketplaces, have elevated their competitive position, moving from traditional credit-card and consumer-finance solutions to pursue deepened customer engagement leveraging payment solutions. For example, MercadoLibre, Latin America’s largest e-commerce player, owns the online payments network MercadoPago, and has built an ecosystem encompassing marketplace, payments, shipping, software-as-a-service, and advertising. The enhanced customer experience, as well as revenue and valuations generated by retailers, have challenged banks to up their game in order to preserve their market position. One example is the collective launch of mobile payments platform Modo by more than 35 Argentine financial institutions in December 2020, offering a solution for account-to-account money transfers and in-store QR payments.

New form factors, faster payments

As expected, both the pandemic’s impact and the resulting economic environment led to significant shifts in spending patterns. Globally, the number of non-cash transactions grew by 6 percent from 2019 to 2020.

Digital-wallet usage surged, as consumer preferences evolved even within contactless forms. In Australia, an early success story in “tap to pay” adoption, digital-wallet transactions grew 90 percent from March 2020 to March 2021—by which point 40 percent of combined debit/credit contactless volume originated via digital wallets. 2 “Digital wallets poised to overtake contactless cards as instore payment of choice in Australia,” Finextra, May 19, 2021, finextra.com. In Indonesia, the value of e-money transactions grew by nearly 39 percent between 2019 and 2020, fueled primarily by an increase in digital adoption. 3 Janine Marie Crisanto, “Indonesia e-wallet transaction to reach $18.5 billion in 2021 amid fierce competition,” The Asian Banker , April 9, 2021, theasianbanker.com.

Real-time payments are playing an increasingly important role in the global payments ecosystem, with the number of such transactions soaring by 41 percent in 2020 alone, often in support of contactless/wallets and e-commerce. 4 “Global Real-Time Payments Transactions Surge by 41 Percent in 2020 as COVID-19 Pandemic Accelerates Shift to Digital Payments - New ACI Worldwide Research Reveals,” ACI Worldwide, March 29, 2021, investor.aciworldwide.com. Over the last year growth in instant payments varied widely across countries—from Singapore at 58 percent to the United Kingdom at 17 percent.

Asia-Pacific continues to lead the way in real-time payments: India registered 25.6 billion transactions in 2020 (a 70 percent-plus increase over 2019), followed by China and South Korea. Real-time functionality also fueled mobile wallet adoption in Brazil, which introduced its national real-time payments system, PIX. Fifty-six countries now have active real-time payment rails, a fourfold increase from just six years earlier. In many cases these new clearing and settlement systems took some time to build momentum but are now delivering long-promised volumes.

The introduction of applications capitalizing on instant payments infrastructure in recent years (PhonePe and GooglePay in India, PayNow in Singapore) has given added impetus to growth. Regional solutions are also staking out ground between global networks (such as Visa and Mastercard) and incumbent domestic schemes. For example, the European Payments Initiative (EPI) is building a unified pan-European payments solution leveraging the Single Euro Payments Area (SEPA) Instant Credit Transfer (SCT Inst) scheme for point of sale as well as online usage. In the United States, The Clearing House’s RTP clearing and settlement system has been steadily building volume since its 2017 launch, with Visa Direct and Mastercard Send offering related in-market functionality, and the Federal Reserve’s FedNow Service scheduled to launch in 2023.

Initial real-time payment growth has been primarily in peer-to-peer settings and online transactions. The next tests will be the consumer-to-business point-of-sale and billing spaces (the latter representing a B2B opportunity as well), and their more straightforward paths to monetization.

The pandemic has pushed businesses to reorient their payments operations and customer interactions. Small and medium-size enterprises (SMEs) are increasingly aware of the payment solutions available to them and are motivated to encourage the use of those that best serve their needs and those of their customers. For instance, payments providers are competing to offer customized solutions like QR code, “tap to pay,” and link-based payments (processes initiated by merchants sharing a URL) that make the payment experience seamless, pleasant, and increasingly contactless. Simplification in the merchant onboarding process can also help in attracting more sellers, reducing cost, and elevating the merchant experience.

For example, Mastercard in India launched Soft POS, a multiform-factor white-label solution for banks and payments facilitators that enables a smartphone to function as a merchant acceptance device. Other examples include value-added services like virtual shops and solutions that record and store credit transactions. Network-based marketing enables SMEs to reach a larger pool of customers.

Social-media platforms have embedded payment features, enabling SMEs to execute sales through networks such as Instagram. Venmo’s social-commerce platform helps build SME brand awareness as users can see, like, and comment on each other’s purchases—a useful feature for street vendors and small-business owners who often lack funds to invest in marketing and promotions.

The 2021 McKinsey Global Payments Report

New opportunities in payments.

The push for digital identity verification systems gained momentum during the pandemic, both as a facilitator for expanding e-commerce volumes and as a means for governments to rapidly disburse welfare and other social payments. Examples proliferated across the globe: a digital ID system enabled Chilean authorities to swiftly pre-enroll millions of beneficiaries in social programs and allowed potential recipients to confirm eligibility and, where necessary, appeal their support status online. 5 Mari Elka Pangestu, “Harnessing the power of digital ID,” World Bank Blogs, August 20, 2020, blogs.worldbank.org. In Thailand, more than 28 million people applied for a new benefit for informal workers affected by the pandemic: a digital ID system enabled the government to efficiently filter out those eligible for assistance through other programs.

Digital ID–enabled payment solutions achieved broader usage as well. Transactions through India’s bank-led and real-time Aadhaar Enabled Payments System (AEPS) more than doubled over the two years ending in March 2021, while the value conveyed more than tripled over the same period.

Cross-border payments remain a significant growth area (Exhibit 3). In 2020, even with travel and trade volumes in decline, cross-border e-commerce transactions grew 17 percent. Volumes for cross-border network provider SWIFT were 10 percent higher in December 2020 compared to the prior year: not only has the “re-shoring” of production chains and related shift in trade flows we expected last year so far failed to materialize, but increases in non-trade payment flows have more than offset lower transaction volumes in trade, driven by increased volatility in treasury, FX, and securities. These dynamics are leading to growth in volumes as well as record market valuations for a growing list of payments specialists such as Currencycloud (recently acquired by Visa), Banking Circle, and Wise.

The B2B payment arena is also showing strong growth internationally, especially when viewed in conjunction with invoicing and accounts receivable/accounts payable (AR/AP) management solutions. The largest transaction banks continue to invest in innovative solutions; and Goldman Sachs, a more recent entrant into the space, is developing a platform including integration with SAP Ariba. Given industry-wide initiatives—led by SWIFT and the Financial Stability Board (FSB)—aiming to further increase efficiency of cross-border transactions, we project 6 percent revenue growth in total cross-border payments revenue over the next five years. We discuss this further in chapter 3, “ How transaction banks are reinventing treasury services .”

The next frontier

Asia–pacific’s $210 billion payments revenue opportunity.

Asia–Pacific has been the largest and fastest-growing payments revenue region for the past several years. Given the consistently strong growth rate of China’s economy, this result is not surprising. More interesting, however, is the unique composition of Asia–Pacific’s payments revenue and its implications for longer-term growth.

It is illuminating to consider the payments characteristics of the rest of Asia-Pacific apart from China. Whereas China accounts for roughly three-fourths of the region’s revenue—and indeed generates more payments revenues than any of the individual major global regions—a disproportionate share of its payments revenue is generated by net interest margins earned on deposit balances—particularly those in commercial accounts. As a consequence, the majority of China’s payments economics are inaccessible to institutions and providers domiciled outside the country.

The payments dynamics for the rest of Asia–Pacific stand in stark contrast (exhibit). In fact, these characteristics bear a striking resemblance to Latin America—not only in terms of total revenue (its $210 billion is roughly 35 percent higher than Latin America’s)—but more importantly in its relative focus on consumer activity and credit cards. Only a third of Asia–Pacific’s revenues outside of China are derived from account liquidity, as compared to 50 percent for China.

The pandemic has accelerated reductions in cash usage, particularly in key markets like Indonesia and Thailand, creating new digital revenue opportunities. While some transactions will return as physical storefronts reopen, a solid majority has likely moved permanently to card and wallet-based forms, as well as to emerging online categories such as telemedicine and online yoga and fitness.

Although China has served as Asia–Pacific’s primary growth driver over the past decade, India’s payments revenues are now growing at a faster rate, and in 2020, surpassed Japan as the region’s second-largest revenue generator. Indonesia is another impressive growth story, posting a 2014–19 CAGR of nearly 9 percent, coinciding with multiple payments-related reforms launched by the regulator. A decline in NIMs reversed this trend for 2020, but indicators point to a return to rapid growth in 2021. We project India and Indonesia alone will generate $34 billion of incremental annual revenue by 2025, representing annual growth of nearly 8 percent.

Despite low single-digit revenue growth in mature payments countries such as Japan and Australia, we forecast the Asia–Pacific region excluding China to grow at nearly 7 percent between 2021 and 2025—a rate only slightly slower than China’s. The growth rates of strategically important payments categories like cross-border and instant payments are also expected to remain on similar trajectories.

The region is filled with opportunity: from rapidly expanding B2B activity to an explosion in digital wallets supporting small businesses as well as consumers, accelerated digitization fueled by rapid infrastructure developments, and integrated platforms providing access to multiple ecosystems. Increased access to real-time payment rails has fueled rapid growth in bilateral cross-border payment activity: notable early successes span the Singapore, Indonesia, and Thailand corridors—an area with significant potential for value-added services.

Players interested in the Asia–Pacific market should not overlook growth engines in countries beyond China, many of which offer clearer paths to foreign participation.

The process of reexamining long-standing payments value propositions is already under way. While old tenets still hold true—scale still matters and “owning” the customer relationship remains important, for instance—sticking to them is no longer sufficient to ensure success. The absorption of payments into the full commercial/consumer purchase-to-pay journey has given rise to ecosystems demanding new, more robust services; for example, commerce facilitation rather than a discrete payment experience.

As payments become integrated into broader customer journeys, the sector’s boundaries have naturally expanded. In the 1980s, we defined payments as the various instruments, networks, access and delivery mechanisms, and processes facilitating the exchange of value between buyers and sellers of goods and services. But this notion of payments as a discrete experience is gradually disappearing. The payments industry now encompasses the end-to-end money-movement process, including the services and platforms enabling this commerce journey.

For example, while payments as traditionally defined comprise only 5 to 7 percent of a typical merchant’s software and services spending, payments providers with solid reputations for execution and innovation are well positioned to deliver solutions addressing needs constituting 40 percent of such expenses. Such opportunities help explain why less than one-third of Square’s revenue would be strictly categorized as payments. Similarly, within five years, we expect 40 percent of merchant acquirer revenues to stem from activities other than payment processing.

For players with established credibility in the provision of core payments functionality, the following areas offer attractive natural extensions, although these opportunities will not be evenly distributed across regions:

• Payments and banking-adjacent software, infrastructure, and services. The largest shares of payments revenue continue to accrue at the endpoints of the value chain, where direct interaction with payers and payees is central to the proposition. Even as the payment “pipes” and underlying technology face potential commoditization, opportunities abound in the rapidly evolving payments-as-a-service space, through which traditional players provide the transactional and compliance backbone that enables partners to deliver adjacent services through reimagined front ends. Most examples to date have centered on consumer-facing solutions, but potential remains on the commercial side as well. Other important and less commoditized value-added items include digital identity, risk solutions, charge-back mitigation, and KYC-as-a-service.
• Commerce, sales, and trade enablement. Non-bank market entrants often derive their value from related services, driving down payments pricing in the process. Banks must consider similar approaches to avoid being disadvantaged. In most cases, marketplaces have successfully cultivated an adequate stream of prospective buyers; attracting an ample supply of sellers with distinctive wares is a more vexing challenge—one that payments facilitators are well positioned to solve, leveraging data analytics to reduce time to revenue. Solutions focused on automating the onboarding process, increasing the stickiness of users, and improving the seller experience should find a ready market. Examples include affiliate marketing, loyalty solutions, e-invoicing platforms, and B2B trade directories.
• Balance-sheet-based offerings. Banks are similarly well equipped to introduce new solutions based on emerging payment methods such as instant payment and “buy now pay later” (BNPL) models, or to integrate new solutions and technologies into existing value propositions. Financing and deposit models with significant regulatory requirements or higher risk profiles (including credit cards, BNPL, supply chain and SMB financing) are among the promising areas.

The payments sector is poised for a quick return to healthy 6 to 7 percent growth rates, with fresh opportunities for incumbents and new entrants alike to participate in emerging adjacent revenue streams, further brightening the future picture.

These benefits will not flow evenly to all, however. Players electing not to adapt their strategies—whether by choice, inaction, or lack of investment capacity—are likely to endure below-peer growth and risk being displaced on key customer experiences.

In the remaining chapters of the  2021 McKinsey Global Payments Report , we outline the opportunities—as well as the threats—emerging in CBDCs , global transaction banking , and merchant services .

Philip Bruno is a partner in McKinsey’s New York office, Olivier Denecker is a partner in the Brussels office, and Marc Niederkorn is a partner in the Luxembourg office.

The authors would like to thank Sukriti Bansal, Baanee Luthra, Glen Sarvady, Yash Jain, Aparna Tekriwal, Diksha Arora, Vaibhav Dayal, and Ratul Nagpal for their contributions to this article.

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