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Online shopping, mobile wallets, biometric ID – given all the media attention around new ways to pay, you’d be forgiven for thinking that cash has quietly shuffled off this mortal coil. But it is not so and this Christmas – when retail spending reaches its peak for the year – consumers appear as wedded to cash as ever.

According to Bankrate and Princeton Survey Research Associates International, four in ten Americans will be making their festive purchases with cash.

Considering US shoppers will spend an average of $805.65 on gifts, decorations, food and other Christmas purchases, according to a survey for the National Retail Federation, this is not a small amount of notes.

Why cash?

When we talk about payments it’s easy to focus on convenience, security and acceptance. But one of the things about cash versus plastic is just plain home economics. When you have cash in your hand you have control over the spending; it’s not possible to fork out any more than you physically hold.

“Paying with cash or debit means people definitely have changed their priorities. They’re going to buy what they can afford and no more. That’s very good,” says Ronit Rogoszinski, wealth advisor at Arch Financial Group.

Budgeting is clearly a factor and this is demonstrated neatly by the differences between low and high-income households.

At 53 percent, those with household incomes of less than $30,000 were most likely to say they will use cash for the majority of their purchases. This compares with just 21 percent of those with a household income greater than $75,000 who said cash is their preferred channel.

Plastic fantastic

For higher earners – those with household incomes above $75,000 – plastic is the number one payment method. In particular the richer households prefer credit cards over debit cards – again sound budgetary decisions are a factor here.

Lower earners prefer the debit card. With a debit card a consumer can only spend what’s in their checking account. Unlike the certainty of holding cash, this could be more than they’d like to spend. But unlike a credit card, at least they have the funds and it’s not borrowed money.

Security is another factor. Credit cards offer greater protection – zero liability in most cases – while a debit card doesn’t tend to offer the same level of protection.

Again, it’s interesting that cash remains so popular given the security risks of theft and loss. But in payments there is always a choice and research hints that electronic payments in the US market have suffered because of 2014’s retailer data breaches. ATM Marketplace found a third (34 percent) of US consumers are making more cash purchases because they are worried about card details becoming compromised following a spate of breaches at some of the country’s top national stores.

Mobile wallets

In terms of in-store shopping, it’s arguable whether mobile wallets are really making much of a dent. Cash remains widely used and 84 percent of smartphone users told Bankrate that they do not plan to use a mobile wallet app to make a purchase. Just one percent of shoppers said the mobile wallet would be their go-to channel this year, the same percentage as for checks.

A worrying sign for providers is that the biggest obstacle is the perceived security risk – 36 percent said they are not secure enough. Meanwhile, one in three (31 percent) said other payments are more convenient. The good news is that only 12 percent said they don’t know how to use mobile payments.

Being secure and convenient are meant to be the two big draws for mobile payments – clearly there is work to be done persuading people this is the case. For now, it’s still hard to get people to part with their cash – except at the tills.


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James W. Gabberty

Gabberty is a professor of information systems at Pace University in New York City. An alumnus of the Massachusetts Institute of Technology and New York University Polytechnic Institute, he has served as an expert witness in telecommunication and information security at the federal and state levels and holds numerous certifications from SANS & ISACA.

Zachary Ehrlich

25-year-old writer, and as a native San Franciscan, I am unreasonably loyal to Bank of America, if only for their superhero-like origin story, involving the 1906 earthquake and Italian fruit vendors.

Marisa Mann

Marisa Mann brings over 15 years of experience in consulting and financial services industries to the Solstice team, working on large scale enterprise initiatives across many technologies, including specializing in the digital space – Internet and mobile. Mann is passionate about mobile and the endless possibilities for the enterprise, delivering business value through strong brand recognition and driving to excellence in the consumer experience. Prior to Solstice, Mann worked at JP Morgan Chase, Diamond Management and Technology Consultants, Washington Mutual, Inc, and Accenture.

Brad Strothkamp

Neill Harris

Neill Harris is product marketing director for ATM solutions at NCR. He travels extensively to many of the world's leading banks and financial institutions, articulating how self-service technology and innovation can inform and support strategies and solve challenges.