Banker, know thy customer. Recent research out of the Federal Reserve Bank of Boston that illuminates the connection between consumers’ demographic characteristics and how they choose to pay for things could help bankers better conceptualize their customers’ payment experiences.

This summer, the Boston Fed published findings on the effects of demographics on consumer payment choice. The study drew data from the 2009 – 2013 Survey of Consumer Payment Choice and analyzed how key demographic factors – like gender, race or marital status – affected people’s choice of payment methods.

Women, for instance, use cash much less than men do, and they are more likely to use debit cards and online bill pay. Married people use more checks than single people do. And low-income consumers, as you might expect, rely much more heavily on cash than on any other payment instrument. That payment behavior is consistent over time, and while characteristics of the payments in question matter, consumers’ demographic characteristics matter more, the Fed found.

In short, demographics matter. And that’s important for banks and credit unions to keep in mind as the landscape shifts rapidly around them – both in terms of consumer behaviors and consumer demographics.

“I would say that the majority of [banks] speak very generally about their products and the features of specific products. There isn’t a whole lot of emphasis on trying to segment and trying to carve out the women’s segment,” said Tiffani Montez, a senior analyst with the Boston-based Aite Group.

While retirement planning may be one exception to that rule, she said, about “payments and how people are utilizing their accounts, it tends to be very general in the way they talk about specific features in their products.”

Here, Montez looks specifically at the Boston Fed’s finding that women utilize less cash and more debit cards, checks and online bill pay.

She extrapolates, “If you step back and think about women in general and their attitudes and the role they play in life in general, I think the majority have a lot going on. They’re responsible for a lot, and they’re on the go a lot more, just given everything that they take on in their life.”

Much of Montez’s own work experience, prior to joining Aite Group, focused on helping bankers create digital experiences for their customers.

“If you think of someone using less cash and using the other payment instruments, it becomes about how banks and credit unions create an experience when they’re on the go,” she said. “Does that mean that you offer them alerts based on their interests? Do you give them specific offers that encourage spending? What kind of budgeting tools do you provide access to?”

Where Community FIs Can Lead The Way

Beyond customer experience, the Fed’s findings also hit upon another issue: Low-income customers are much more likely to rely heavily on cash, and they’re also much less likely to have a banking relationship in the first place.

“Demography matters – that is, your age, your ethnic and cultural background are associated with the way in which you manage your financial life, the payment choices you make and the providers you engage with,” said Michael Goodman, a professor of public policy and executive director of the Public Policy Center at UMass Dartmouth. “In a society that’s going through a pretty large scale generational transition, wise financial services providers are going to look long and hard at what these emerging markets want and need.”

While the Fed researchers note that the data doesn’t reveal whether that’s a supply-side problem or a demand-side problem, they do note that the consistently most common reason cited for not having a banking relationship is “I don’t like dealing with banks.”

For Montez, that indicates those consumers may be unable to afford overdraft fees and by avoiding banks, they may be avoiding that sense of unpredictability. She sees a potential opportunity there for prepaid cards that customers cannot overdraw.

And Goodman, who has previously researched the unbanked and underbanked in New Bedford, said that while he doesn’t think cash is going to become obsolete anytime soon, the Fed’s findings do still hint at a larger underlying problem of how to better integrate certain segments of the population into the mainstream banking system.

“I think it’s becoming more and more in the interest of our financial institutions to pay much closer attention to this problem, and it also reminds us how important community-based financial institutions are in this environment where local banks that know the communities can build the kinds of relationships and trusts that appear to be associated with connecting people to the banking system,” he said. “I think those institutions are going to have to continue to lead the way.”