The migration away from cash to other forms of payment has been a steady progression over the past decade.
The Federal Reserve’s 2019 Diary of Consumer Payment Choice found that consumers only use cash for 26% of transactions, down from 30% in 2017. For purchases greater than $25, the number drops to 10%. Yet despite the purported death of cash, there is one area of the economy where cash still reigns: small-dollar transactions. The same report found that cash makes up nearly half of all payments under $10 and 42% of payments less than $25.
Despite the dominance of cash in small-dollar transactions, recently there has been an emphasis on going digital for all amounts of transactions. Whether for avoidance of using cash for health and safety reasons in the wake of COVID-19 or minimizing trips to the ATM and utilizing a readily available card, there has been a transition into higher frequency of small-dollar transactions.
In fact, fintech apps have seen an increase in usage of apps to 72% as a result of the coronavirus. Even when the virus begins to ebb, we believe this behavior will stick around for both ease of use as well as continued safety precaution. This is the trend of going digital for transactions in the U.S., but we are also seeing this behavior adapted in other countries.