Americans' Use of Cash Dropping, Except Among Gen Y
The latest Aite Group report sizes and forecasts U.S. consumers' use of cash, drawing on two surveys, one of 4,696 consumers conducted in August 2010, the other of 1,039 U.S. consumers conducted in October 2010. The report examines Americans' use of cash as a payment method in person-to-person, bill-pay, and retail transactions.
Cash use, which has been declining in U.S. payments transactions, will continue to do so through 2015, the analyst firm predicts. Consumers' use of cash will decline by a total of 17%, or 4% per year, between 2010 and 2015, dropping to slightly more than $1 trillion.
But while 30% of consumers use cash less often than they did two years ago, 20% use it more often, the report found. Gen Y is the only generation more likely to use cash more often today than it did two years ago -- 18% of this group use cash "significantly more" than they did two years ago and 13% use it "somewhat more" today (43% use cash the same amount they did two years ago).
Why are 18 to 30-year-olds using cash more often while everyone else is shifting to debit cards and mobile payments? Ron Shevlin, senior analyst at Aite and author of the report, notes that Gen Yers probably never used much cash pre-2008, so there was room for growth. "As pre-adults, Gen Yers used debit and credit cards from their parents to make purchases, then as they became adults they've relied heavily on debit cards," he says. "In the past two years, as the economy turned down, I think some turned to cash as a budgeting device."
This demographic group is still struggling financially. The Pew Research Center has compiled statistics about Gen Yers, including these: 37% are unemployed, more than a third rely on their parents for financial support, only 31% earn enough money to live the life they want, 13% of 22 to 29 year olds moved back in with their parents because of the recession, 55% stated they are watching their spending closely because of the recession, 77% are concerned they aren't saving enough.
A Western Union survey of 3,000 consumers this August found that Gen Y is experiencing financial stress and difficulty in obtaining credit. Nearly 30% of Gen Y'ers reported having difficulty in managing their spending, more than 20% wait longer to pay their bills, and 35% have borrowed money from friends or family members. Half of Gen Y respondents reported feeling increased stress about financial obligations in the last six months. More than one in three members of Gen Y said that their financial situation has worsened in the last six months.
These numbers paint a picture of a group that doesn't have a lot of money and is to some extent living hand to mouth, rather than flashing bank cards. However, it's also a group ripe for online and mobile payments. Research Fiserv released earlier this year found that 80% of Gen Y use online banking, a higher percentage than any other generation, and that 15% plan to receive and pay bills via their mobile device, representing more than 1.5 million households.