Cash still primary payment system for consumers

From mobile wallets to peer-to-peer payments, credit cards to prepaid debit cards, consumers certainly don't suffer from a lack of options when it comes to how they spend their hard-earned money. And while newer payment options are more common today than they were as recently as five years ago, cash still remains king of the crowd, the chief financial resource for the unbanked and underbanked, recent data suggests,.

Last year, more than 85 percent of consumers used cash to purchase goods and services, according to the most recent data available from Blackhawk Network. In particular, paper bills were primarily opted in favor of, above all other methods, for transactions that were $20 or less.

While there is no denying that cash is being used less frequently today than it has in the past - at least in the U.S. - the percentages of those who use cash almost exclusively are similar to the rate in which consumers are buying with alternative payment systems only occasionally. For example, around 1 in 7 respondents in a Gallup poll cited cash as the purchase option they most frequently utilized, translating to around 14 percent. In the Blackhawk Network survey, 17 percent said they shopped with mobile wallets at least once in the previous 12 months.

Cash-to-economic output ratio on the rise
In much of Europe, the ratio of cash to economic output is climbing. Based on data crunched by Daniel Gros, director of the Center for European Policy Studies, this includes Hungary, Switzerland and the Czech Republic, among others, Bloomberg reported.

For the U.S. in particular, however, cash maintains its status as consumers' primary payment means, based upon findings from the Federal Reserve Bank of San Francisco. In 2015, approximately 33 percent of retail purchases were cash-based, with debit cards in a distant second at 27 percent and credit cards at 21 percent.

Cash also accounts for a substantial percentage of real estate purchases. In October, all-cash sales represented 20 percent of all residential transactions, according to the National Association of Realtors. That's down slightly from 22 percent during the corresponding month in 2016 but unchanged compared to September.

Unbanked and underbanked make frequent use of cash
The degree to which consumers use cash is notable because of the sizeable number of Americans who are unbanked or underbanked, making cash their primary payment form. In 2015, according to the Federal Deposit Insurance Corporation, roughly 9 million households were unbanked, meaning they made zero use of financial institutions. Meanwhile around 24.5 million households were underbanked, having the bare minimum of purchase options aside from cash or money orders, such as checking and/or savings accounts. Underbanked consumers may, however, use alternative financial services to better diversify their purchase methods.

Although some prognostications suggest cash is a dying medium, legislative actions on Capitol Hill indicate cash likely won't be going away anytime soon - and may even grow more common. Because cash payments typically do not show up on consumer credit reports, lawmakers are considering requiring lending institutions to make use of alternative credit scores for mortgage applications. The bill is called the Credit Score Competition Act and was reintroduced in August. Legislators in support of the bill are hopeful that alternative credit reports will give consumers more options, while at the same time providing greater transparency for lenders, helping them better establish borrowers who are truly creditworthy.

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