FIRST CENTRAL BANK FORUM ON PAYMENTS SURVEYS
CHICAGO, WEDNESDAY, MARCH 25, 2009
- Eugenie Foster, retired from the Board of Governors of the Federal Reserve , contracted as project manager of the GPSP, forum moderator
- Chad Harper, Senior Manager Policy & Market Analysis – Federal Reserve Banks Cash Product Office, San Francisco
- Carlos Arango, Bank of Canada Currency Department, Economic Research & Analysis, in charge of a survey into Canadian payment trends
- Barbara Bennett, Federal Reserve Banks Cash Product Office, San Francisco, responsible for Product Strategy, Customer Outreach, and Service Level Agreements
- Geoffrey Gerdes, Senior Economist – Board of Governors of the Federal Reserve System, Washington, DC, Division of Reserve Bank Operations and Payment Systems
- Varya Taylor, Bank of Canada Currency Department, Economist studying retail payment trends and developments
- Nicole Jonker, De Nederlandsche Bank, Economist – Payments Policy Division
- Scott Schuh, Director and Economist – Emerging Payments Research Group – Federal Reserve Bank of Boston
- Ibrahim Al-Nassar, Deputy Governor, Saudi Arabian Monetary Agency
- Jason Ma, Manager, Development & Policy, Currency Department, Monetary Authority of Singapore
- Armando (Andy) Suratos, Deputy Governor, Banko Sentral ng Pilipinas and IACA Board Member. Oversees the Security Plant Complex, which includes banknote printing, used note processing, the coin Mint, and the gold refinery
- Jorge de la Vega Gongora, Manager of Planning and Issue Department – Banco de Mexico, includes note issue and market research, conducting public education and surveys.
- Darren Flood, Senior Manager, Reserve Bank of Australia, Payments Policy Department, participating in work on payment surveys.
- Adrian Baxter, CEO of Currency Research, organizers of the Currency Conference and the International Commercial Cash Operations Seminar and VP / Executive Director of IACA
- Sybil Baxter, Administration Officer for IACA.
- Bob Chakravorti, Senior Economist, Federal Reserve Bank of Chicago, attended day 2.
Genie Foster gave her presentation: What do we know about cash payments? Genie observed that:
- More than 10 central banks / national organizations have published results of payments surveys on cash since 2003
- There are no agreed methodologies for payment surveys
- While specific details vary by country, the general retail payments trends are moving in similar directions
- No other payment instrument provides all of the functionality of cash
- Cash demand and use for payments will continue for the foreseeable future
- Currency in circulation will grow (or contract) with the economy
- Currency will be used for small value payments and as a store of value
- Debit card use is the strongest growth trend
- Other payment instruments may emerge
BANK OF CANADA
Carlos Arango thanked everyone for the opportunity to meet and presented “The Bank of Canada’s Experience with Payment Surveys”. He explained that the Bank is a provider of payments services and is interested in the costs, alternatives, and risks associated with payments. He gave an overview of the Bank’s 2004, 2006, and Canadian Financial Monitor add-on survey work. Carlos introduced the Bank’s 2009 diary based survey, designed in collaboration with the FRB Boston. Carlos concluded that surveys have helped the Bank of Canada to understand:
- public confidence related to the use of banknotes;
- the costs of payment methods;
- the two-sided nature of payments;
- that different research questions require different survey approaches.
FEDERAL RESERVE BANK OF BOSTON
– Scott Schuh presented “Survey of Consumer Payment Choice: Overview and Development (SCPC)”. He discussed the motivation, the objectives, and strategy for payment surveys. He described the need for public data, explained the SCPC development from 2003 to 2008, and introduced the preliminary 2008 results. Scott presented as background lessons learned from research on check volumes through the last 30 years, and how the emergence of reliable data had enormous effect on the operations of both the Federal Reserve System and those of financial institutions across the United States. He suggested that central banks and other decision makers were motivated by data and often asked for more. Scott described lessons learned from the SCPC:
- Good surveys are harder than you think
- Everything takes longer than planned
- Watch out for too many cooks
- Are consumer surveys effective?
- Are consumer surveys accurate?
- Consumer rights / privacy issues must be addressed
FEDERAL RESERVE CASH PRODUCT OFFICE
Barbara Bennett provided context and background for the FR Cash Product Office (CPO) Pilot Cash Payment Study, which was a business survey rather than a consumer survey. The study targeted 737 randomly selected businesses and 40 certainty businesses. It was a mixed mode questionnaire that could be completed on-line, by mail, or over the phone. Barbara explained that the biggest challenge was determining what the CPO was trying to learn. The CPO struggled to identify the objectives for the pilot and concluded that the CPO needed to know, from an operational point of view, the trends in cash usage from a business planning perspective. Chad Harper explained the lessons learned from the Pilot Study:
- The schedule was likely too aggressive, and the timing was less than ideal;
- Some respondents could not answer questions regarding transaction values and counts;
- 36% said the data was not available,
- 21% indicated it was confidential,
- 23% said the task was too time consuming;
- Different business types had widely divergent record keeping practices;
- The larger hand-selected firms were generally more able to answer the questions;
- The size of participant incentives did not seem to matter greatly.
The Pilot Study was intended to provide guidance on a more extensive later study. The CPO concluded that the response rate was a lower than anticipated, although it was statistically within the range of other significant survey work. The CPO elected not to continue on to the main study because the cost of a large national survey was excessive, on the order of $5 million, in light of the expected results.
The CPO also sponsored the Electronic Payment Study as an add-on to the FR Retail Payments Study. A consultant gathered data from card firms and networks on the number of low-value card payments. This data provided a benchmark for the use of cards for micropayments in order to potentially project the rate of cash substitution.
The Pilot Study led the CPO to the now-ongoing “Interviews with Key Retail Businesses.” CPO representatives ask selected large businesses to provide payment trends data using a standard template.
RESERVE BANK OF AUSTRALIA
Darren Flood gave an overview of the “Australia’s 2007 Payment Use Study”. Darren explained as background that the RBA had been interventionist in the retail payment space, in particular with credit card interchange fees; RBA’s policies have been somewhat controversial and under a lot of scrutiny, including by the courts. The RBA imposed a cap on fees and promised to review them in 5 years time. RBA sought data on payments in connection with the review, including:
- Cost of payments to financial institutions, merchants, and individuals,
- A survey of payments by individuals,
- A month of transactions data from large financial institutions,
- A survey of selected retailers
- A survey of small merchant payment methods
The consumer survey was based on pocket-sized diaries in which participants were asked to record every transaction during a two week period.
The RBA contracted with a specialist market research firm with an existing database of consumers. The results included:
- Payment instrument types used at particular merchants,
- How transaction size affected payment instrument,
- The number and size of cash transactions,
- How people obtain cash and the number of transactions per withdrawal,
- How demographic and financial factors affect payment use.
Darren reported as lessons learned:
- Use of market research firm was highly beneficial – they already had demographic data;
- Survey fatigue is a concern;
- Difficult to be sure of respondents’ understanding of the survey requirements, for example whether payments were credit or debit, and whether they paid surcharges;
- The need to balance cost and sample size.
RBA would like to repeat surveys every 3 years.
DE NEDERLANDSCHE BANK
Nicole Jonkers presented “How to measure the number of cash payments? The impact of survey design.” DNB economists sought to answer the question “What is the best methodology to measure the number of cash payments? Nicole and a colleague ran an internal project to assess the effects of seven pilot payment surveys with different characteristics.
- Diary vs. questionnaire
- 1-day vs. 1-week diary
- 1-week diary with vs. without interim reminder
- 1-day diary with vs. without additional questionnaire
- Online vs. telephone questionnaires
- Online panel vs. regular database
Conclusions about the pilot study:
- Research design matters a lot!
- Most important measurement error is omission of small cash transactions.
- The omission is smallest with a 1-day diary …
- … and highest with a questionnaire or a 1-week diary
- An interim reminder only partly reduces omission with a 1-week diary
- 1-day diaries may introduce ‘electronic’ bias
Nicole shared observations about previous DNB payment study experiences.
- + high number of observations
- + availability of ‘true’ transaction records
- difficult to draw a representative sample of all points of sale
- availability of ‘true’ transaction records biased
- exclusion of P2P transactions
- + inclusion of P2P transactions
- + less difficult to draw a representative sample
- measurement error
Nicole discussed the benefits of outsourcing survey work. Outsourced work is generally less time consuming (as much as 5 time faster than internal work depending on resources applied), but outsourcing may be as much as 10 times as expensive.
The participants held a discussion of lessons learned.
Is there an optimum model? Is it possible to reach agreement on standards?
- The questions drive the data approach.
- Understanding the objectives is very important.
- Would a shared set of questions yield sufficient commonality for a global payment survey?
- A global study might help in understanding of how legislation affects payment habits.
- While surveys provide data on payments, they also provide information on reasons for payment choices.
- Each survey methodology has benefits and acceptable error rates.
- Expecting perfection from a survey inhibits progress. Some errors in collection may be within acceptable rates.
- Reasons for payment surveys can include:
- Is there consolidation in cash usage?
- If so, to what degree?
- How quickly is this happening?
- What trends can we extrapolate the data?
- How does survey data affect policies on currency printing, outsourcing, system procurement?
- Larger samples are probably more credible for determining trends.
- Central banks might like to know what portion of the cash in circulation is used for spending and what portion is stored value.