Consumers are moving away from cash - but there's one exception

BI Intelligence

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If you instinctively reach for a card or mobile wallet instead of cash, then don't worry. You're not alone.

Since 2014, the popularity of cash has been declining while the use of cards has increased, and this trend is particularly pronounced among younger consumers. A new study from CreditCards.com reveals that age is the greatest predictor of a consumer's preference for cash or cards when making small purchases.

The poll found that 18-29 year-olds are the only demographic that prefers cards to cash for small purchases, which is especially interesting because minor purchases are a category in which cash is largely still king. According to the study, 58% of U.S. adults use cash for purchases under $5, while 22% use debit cards and 11% use credit cards.

This data could indicate a broader move away from cash, especially for younger customers. BI Intelligence, Business Insider's premium research service, has discovered that 40% of millennials would completely give up cash, while 17% were unsure.

This preference for cards could spur merchants to accept more card payments as millennials grow older and acquire more money and spending power. 

But this is just one piece of the ever-changing world of payments. The rise of mobile wallets and the increase of smartphone usage has been one of the main catalysts for evolution in the way consumers pay for goods and the way in which financial institutions and merchants interact with customers.

Evan Bakker and John Heggestuen, analysts at BI Intelligence, have compiled a detailed report on the payments ecosystem that drills into the industry to explain how a broad range of transactions are processed, including prepaid and store cards, as well as revealing which types of companies are in the best and worst position to capitalize on the latest industry trends.

BI Intelligence

Here are some key takeaways from the report:

• 2016 will be a watershed year for the payments industry. Payments companies are improving security, expanding their mobile offerings, and building commerce capabilities that will give consumers a more compelling reason to make purchases using digital devices.
• Payments is an extremely complex industry. To understand the next big digital opportunity lies, it's critical to understand how the traditional credit- and debit-processing chain works and what roles acquirers, processors, issuing banks, card networks, independent sales organizations, gateways, and software and hardware providers play.
• Alternative technologies could disrupt the processing ecosystem. Devices ranging from refrigerators to smartwatches now feature payment capabilities, which will spur changes in consumer payment behaviors. Likewise, blockchain technology, the protocol that underlies Bitcoin, could one day change how consumer card payments are verified.

In full, the report:

• Uncovers the key themes and trends affecting the payments industry in 2016 and beyond.
• Gives a detailed description of the stakeholders involved in a payment transaction, along with hardware and software providers.
• Offers diagrams and infographics explaining how card transactions are processed and which players are involved in each step.
• Provides charts on our latest forecasts, key company growth, survey results, and more.
• Analyzes the alternative technologies, including blockchain, which could further disrupt the ecosystem.

To get your copy of this invaluable guide, choose one of these options:

1. Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
2. Purchase the report and download it immediately from our research store. >> BUY THE REPORT

The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of the payments ecosystem.