How People Pay Each Other: Data, Theory, and Calibrations

Using a representative sample of the U.S. adult population, we analyze which payment methods consumers use to pay other consumers (p2p) and how these choices depend on transaction and demographic characteristics. We construct a random matching model of consumers with diverse preferences over the use of payment methods for p2p payments. The model is calibrated to the share of p2p payments made with cash, checks, and electronic technologies from 2015 to 2019. We find about two-thirds of consumers have a first p2p payment preference of cash. One-third rank checks first. Approximately 94 percent of consumers rank electronic technologies second.