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Has COVID Changed Consumer Payment Behavior?

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Abstract

The COVID-19 pandemic has caused large changes in consumer spending, including how people make their payments. We use data from a nationally representative survey of U.S. consumers collected before COVID in 2018 and 2019 and during COVID in 2020 to analyze changes in consumer payment behavior during the pandemic. We find that compared with their payment behavior in 2019, consumers had shifted some of their purchases from in person to online by fall 2020, significantly lowered their use of cash for purchases, and shifted their person-to-person (P2P) payments away from paper (cash and checks). Those changes are consistent with what we might expect, as many people were less able or willing to shop in person. The adoption of electronic P2P increased, especially the use of payment apps such as PayPal, Venmo, and Zelle. Consumers who worked exclusively from home during COVID made significantly higher shares of their payments online or through mobile devices and were less likely to use cash at all compared with those who worked at least partly in person, even after we control for income and education levels. In contrast, payment-behavior changes that took place from 2018 to 2019 were smaller in magnitude and largely insignificant, suggesting that COVID likely accelerated any longer-term trends. Although it is too soon to determine whether these changes will persist for the longer term, we observed them several months after the onset of the pandemic, so they certainly were not just temporary shifts.

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  • Claire Greene & Ellen A. Merry & Joanna Stavins, 2021. "Has COVID Changed Consumer Payment Behavior?," Working Papers 21-12, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbwp:93548
    DOI: 10.29412/res.wp.2021.12
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    References listed on IDEAS

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    1. Scott R Baker & Robert A Farrokhnia & Steffen Meyer & Michaela Pagel & Constantine Yannelis & Jeffrey Pontiff, 0. "How Does Household Spending Respond to an Epidemic? Consumption during the 2020 COVID-19 Pandemic," The Review of Asset Pricing Studies, Society for Financial Studies, vol. 10(4), pages 834-862.
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    4. Joanna Stavins, 2021. "Payments Evolution from Paper to Electronic: Bill Payments and Purchases," Working Papers 21-5, Federal Reserve Bank of Boston.
    5. Martin Eichenbaum & Miguel Godinho de Matos & Francisco Lima & Sergio Rebelo & Mathias Trabandt, 2024. "Expectations, Infections, and Economic Activity," Journal of Political Economy, University of Chicago Press, vol. 132(8), pages 2571-2611.
    6. Serhan Cevik, 2020. "Dirty money: Does the risk of infectious disease lower demand for cash?," International Finance, Wiley Blackwell, vol. 23(3), pages 460-471, December.
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    8. Heng Chen & Walter Engert & Kim Huynh & Gradon Nicholls & Mitchell Nicholson & Julia Zhu, 2020. "Cash and COVID-19: The impact of the pandemic on demand for and use of cash," Discussion Papers 2020-6, Bank of Canada.
    9. Jonker, Nicole & van der Cruijsen, Carin & Bijlsma, Michiel & Bolt, Wilko, 2022. "Pandemic payment patterns," Journal of Banking & Finance, Elsevier, vol. 143(C).
    10. Joanna Stavins, 2016. "The effect of demographics on payment behavior: panel data with sample selection," Working Papers 16-5, Federal Reserve Bank of Boston.
    11. Joanna Stavins, 2017. "How do consumers make their payment choices?," Research Data Report 17-1, Federal Reserve Bank of Boston.
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    Cited by:

    1. Kotkowski, Radoslaw, 2023. "National culture and the demand for physical money during the first year of the COVID-19 pandemic," Finance Research Letters, Elsevier, vol. 51(C).
    2. Horvath, Akos & Kay, Benjamin & Wix, Carlo, 2023. "The COVID-19 shock and consumer credit: Evidence from credit card data," Journal of Banking & Finance, Elsevier, vol. 152(C).
    3. Felt, Marie-Hélène & Hayashi, Fumiko & Stavins, Joanna & Welte, Angelika, 2023. "Regressive effects of payment card pricing and merchant cost pass-through in the United States and Canada," Journal of Banking & Finance, Elsevier, vol. 154(C).

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    More about this item

    Keywords

    consumer payments; consumer surveys; payment behavior; COVID-19;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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