Payments Evolution from Paper to Electronic: Bill Payments and Purchases

Consumer payments in the United States gradually have been shifting away from paper checks for the past several years. Cash use has declined as well, although at a much slower pace. As the number of check payments has decreased, those payments have been replaced with electronic and card payments. However, the transition from paper to electronic and card payments for bills has not proceeded in the same way as the transition for purchases. Using detailed consumer survey panel data collected over nine years, we track the same respondents over time and find that consumers who reduced their check or cash use for bill payments in a given year were more likely to reduce their check or cash use for purchases in the following year; but a reduction in check or cash use for purchases was not followed by the use of fewer checks or less cash for bill payments. The results suggest that a change in bill payment behavior may be a precursor to payment behavior changes in general. These results may help predict changes in payment instrument use for various transaction types as new payment methods, such as faster payments or central bank digital currency, become available to consumers in the future.