Study: Debit card boom shows no signs of waning

Study: Debit card boom shows no signs of waning

As consumers scaled back spending during the recession, they embraced a pay-as-you-go approach, forsaking charging for debiting -- a trend that does not appear to be going away anytime soon, according to PULSE network's 2010 Debit Issuer Study.

The debit market is projected to continue to increase in 2010, the study says, following a 10 percent increase from 2008 to 2009. The study says that growth was largely boosted by small-ticket items.

To support this trend, card issuers are "adopting a back-to-basics approach" geared toward acquiring new accounts and promoting larger debit use for smaller daily transactions by means of "targeted marketing campaigns" and incentives emphasizing debit over alternate payment methods

In fact, according to the study, financial institutions are pushing debit card use among consumers as a way to increase their debit portfolios. Additionally, 72 percent of issuers ranked debit card "penetration, activations and usage" as their top priority of 2010.

Anne Rhodes, the senior manager at PULSE's public relations office, explained why issuers prefer debit use in an e-mail to CreditCards.com. She states, "PIN debit offers a single-message transaction that is completed in-person by the authorized cardholder. Because cardholders must enter their PIN, fraud and chargeback rates are much lower than with other payment methods."

First, an increasing number of issuers, 36 percent, have started a new initiative known as "instant issuance" inside branch locations that provides consumers with a debit card as soon as an account is opened instead of waiting for it to come in the mail. The idea behind instant issuance is to create a bond between the consumer and the account..

Second, debit issuers are looking to significantly increase debit use among business account holders. Currently, 70 percent of institutions offer business debit cards, but only six percent of the debit market is made up of business customers. Tony Hayes, a partner at risk management firm Oliver Wyman, suggests in a press release that banks at last realize "the untapped potential in the business debit market." 

Finally, debit issuers are examining rewards programs. Fifty-eight percent of financial institutions already employ a debit rewards program in some form, while 36 percent of those surveyed identified rewards as a "growth opportunity in 2010." The study found that some of the issuers supported rewards programs on the basis that they created a more responsive relationship with the consumer and "increased overall debit volume.

Published: August 25,2023