Download Article

Although studies consistently find that credit cards are the most costly payment method for merchants to accept in person, research has been mixed on the relative acceptance costs of debit cards versus cash. To accept debit cards, for example, merchants pay interchange fees for processing card transactions among other costs—and despite regulation in the United States to cap interchange fees, some U.S. merchants still consider these fees too high. Cash transactions also impose costs: merchants may pay bank fees to deposit cash or hire employees to count and sort it.

Fumiko Hayashi examines which of two payment methods—cash or debit cards—is more costly for merchants to accept in person in six countries: the United States, Australia, Canada, the Netherlands, Norway, and Sweden. She finds that debit cards have been more costly for merchants to accept than cash in the United States in recent years, while cash has become more costly to accept than debit...

The number of new small businesses in Colorado, New Mexico and Wyoming increased in 2020, even as the COVID-19 pandemic caused overall economic activity to decline at historic rates. However, the small businesses in the Rocky Mountain region that remained open or were newly started were not the same type that typically drives significant job creation. Only recently has the number of small businesses that employ additional workers begun to recover.

Despite extraordinary economic hardship presented by the COVID-19 pandemic, problem asset levels remain muted through March 2021, with the percentage of noncurrent loans and other real estate (ORE) owned representing less than one percent of total loans and ORE. For context, problem assets at community bank organizations (CBOs) peaked at over 5.5 percent in the last financial crisis.Consistent with many government-led efforts to provide respite, Section 4013 of the CARES Act granted banks temporary relief from troubled debt restructuring reporting. The volume of these loan modifications continues to fall for CBOs from an initial level of $198 billion in June 2020 to $56 billion, or 3.2 percent of total loans, in March 2021.While loan modifications_ provided necessary relief to borrowers adversely affected by the pandemic, the level of loans modified at the onset led to uncertainty around future increases in problem loans. These concerns have lessened as the economic outlook has...

To illustrate a topic highlighted during the Kansas City Fed’s Agricultural Symposium, Bank videographers Brett Smith and Kevin Wright traveled to Spencer Farms in Ottawa, Kansas to learn how technology affects productivity in agriculture.

Owner and operator Kevin Spencer, who runs Spencer Farms with his sons, Brad and Aaron, described the impact of technology in use today:

The number of new small businesses in Colorado, New Mexico and Wyoming increased in 2020, even as the COVID-19 pandemic caused overall economic activity to decline at historic rates. However, the small businesses in the Rocky Mountain region that remained open or were newly started were not the same type that typically drives significant job creation. Only recently has the number of small businesses that employ additional workers begun to recover.

Download Article

Although studies consistently find that credit cards are the most costly payment method for merchants to accept in person, research has been mixed on the relative acceptance costs of debit cards versus cash. To accept debit cards, for example, merchants pay interchange fees for processing card transactions among other costs—and despite regulation in the United States to cap interchange fees, some U.S. merchants still consider these fees too high. Cash transactions also impose costs: merchants may pay bank fees to deposit cash or hire employees to count and sort it.

Fumiko Hayashi examines which of two payment methods—cash or debit cards—is more costly for merchants to accept in person in six countries: the United States, Australia, Canada, the Netherlands, Norway, and Sweden. She finds that debit cards have been more costly for merchants to accept than cash in the United States in recent years, while cash has become more costly to accept than debit...

Download Article

In recent decades, both the number of community banks and their share of U.S. banking assets have steadily declined, raising questions about the future of community banking. In addition to competitive pressures from larger banking organizations, community banks face growing challenges from broader economic consolidation, changing demographics, and rapidly advancing financial technologies.

Matt Hanauer, Brent Lytle, Chris Summers, and Stephanie Ziadeh explore the role of community banks in the U.S. economy, the challenges they face, and their outlook for the future. They find that despite their declining market share, community banks remain crucial financial services providers and are the predominant providers of banking services in rural communities across the country. In addition, they find that community banks are outsized providers of credit to agricultural and commercial borrowers, including during periods of economic stress. The authors argue...

The potential for remote work represents both a challenge and an opportunity for Nebraska in addressing labor shortages that have emerged alongside an ongoing economic recovery from the pandemic. One year ago, Nebraska’s economy, like many others, was reeling from the initial effects of the pandemic and associated business closures. Halfway through 2021, however, unemployment in the state generally has returned to its pre-pandemic level and businesses have identified labor shortages as one of the primary constraints to further gains in economic activity. Nebraska businesses may consider hiring remote workers in other states as a possible solution to these labor shortages, but out-of-state firms may also increasingly compete for existing talent in Nebraska.

Businesses with no employees other than the owner often turned to personal funds in response to financial challenges during the pandemic. These nonemployers were less likely than employer firms to seek pandemic-related emergency funding and less likely to be approved.

Interest rates on some agricultural loans have increased slightly in recent quarters, according to the National Survey of Terms of Lending to Farmers. The average rate on non-real estate farm loans increased about 30 basis points from the all-time low at the end of 2020 while the average for real estate loans declined further (Chart 1). However, alongside steady benchmark rates, the average cost of financing on all farm loans remained more than 80 basis points less than the recent average and substantially lower than any previous period on record.

August 18, 2021

10 a.m. – 12 p.m. CT

About the Summit   The Federal Reserve Bank of Kansas City in partnership with The Diversity & Inclusion Consortium will host the 2021 Diversity and Inclusion Summit: Allyship! From "Anti" to "Ally": A Story of Personal Transformation.

The purpose of the Diversity and Inclusion Summit is to convene D&I practitioners and champions for professional development dedicated to the exchange of concepts, insights and best practices in the field of diversity, equity and inclusion.  

Benefits of Attending By attending this summit, you will:

Return on average assets, a key profitability measure for community banking organizations (CBOs), improved in the first quarter of 2021 and is back to the ten-year peak experienced in 2019. This improvement is primarily attributable to provision expense declining from heightened levels seen early in the pandemic.Net interest income (NII), a key component of CBO earnings, compressed in 2020 when measured against average asset levels and remains at a historical low in the first quarter. The decline in NII as a percentage of average assets was due to inflated balance sheets from participation in the Paycheck Protection Program (PPP) and, to a lesser degree, the low interest rate environment. Despite lower NII ratios driven by the influx of low-yielding PPP loans, banks actually saw a nominal increase in the absolute dollar volume of overall income.CBOs increased allowance for loan and lease loss (ALLL) account balances last year in preparation for potential credit portfolio...

While COVID-19 continues to cause disruptions in coin circulation, Americans can take simple steps to help alleviate the issue.

According to a statement from the U.S. Coin Task force, the economy isn’t experiencing a coin shortage — $48.5 billion in coins are in circulation. Much of it, however, is dormant inside American households. Returning just a fraction of that currency will greatly improve the circulation problem, making a meaningful difference for millions of Americans and businesses that rely on coins to support cash transactions, the statement said.

Banks and retailers can read the task force’s recommendations and guidance on the issue External Linkhere. The U.S. Coin Task force encourages the public to help improve coin circulation with the following steps:

Research led by Kansas City Fed senior economist Nida Çak?r Melek suggests that the response of U.S. consumption to oil price changes has become more muted. That analysis was detailed in a first quarter 2021 Economic Review article by Çak?r Melek and Robert J. Vigfusson, assistant director of the Division of International Finance at the Board of Governors of the Federal Reserve System.

Download Article

In response to the sharp economic downturn during the COVID-19 pandemic, Congress passed unprecedented policy relief measures to support households, businesses, and the broader economy. Compared with previous fiscal stimulus responses, these relief programs have been unmatched in size and scope, speed of response, and novelty of design.

Huixin Bi and Chaitri Gulati review recent empirical research on three fiscal relief programs—stimulus checks, augmented unemployment insurance (UI) benefits, and the Paycheck Protection Program (PPP)—to understand their effects on the broader economy as well as their effectiveness. Bi and Gulati find that stimulus checks provided direct income support to liquidity-constrained and lower-income households, but because households who did not suffer income losses put the money into personal savings, the full boost to consumption has yet to be seen. Augmented UI benefits fully replaced earnings for the majority of...

The Oklahoma City Branch opened on August 2, 1920, as the third branch office of the Federal Reserve Bank of Kansas City. Since then, the Oklahoma City Branch has served as a local connection to the nation's central bank. Learn about the history of the Oklahoma City Branch and how it has evolved over the years with the following resources.