2010 Debit Issuer Study, Commissioned by PULSE, Finds Consumers
Increasingly Prefer Debit Over Cash
HOUSTON, Jun 14, 2010 (BUSINESS WIRE) --The 2010 Debit Issuer Study, commissioned by PULSE, reveals that
the debit market remained robust during the second year of the economic
downturn and is projected to grow strongly in 2010. The study finds that
much of the growth in debit use is in small-ticket transactions,
suggesting that more consumers prefer debit over cash.
Issuers surveyed experienced overall debit transaction growth of 10
percent between 2008 and 2009. Much of this growth was with small-ticket
transactions. In 2009, 58 percent of all debit transactions were less
than $20.
"The debit market has continued to weather the economic storm as a
result of consumer preference for debit and increasing merchant
acceptance of small-ticket debit transactions," said Cindy Ballard,
PULSE executive vice president. "As consumers scaled back spending
during the recession, they embraced a pay-as-you-go approach and are
keeping their debit card top of wallet."
Furthermore, the study found that year-over-year PIN debit transaction
growth outpaced that of signature debit transactions. Between 2008 and
2009, the use of PIN debit grew by 13 percent with an average ticket
size of $41; signature debit transactions increased by nine percent with
an average ticket of $35. Both figures for average ticket have declined
by roughly $1 to $2 compared to the previous study. In addition, active
debit cardholders, those who conducted at least one PIN or signature POS
transaction within the last 30 days, performed on average 17.3 POS
transactions per month, also flat compared to 2009.
The 2010 Debit Issuer Study found that debit card penetration -
the percentage of eligible accounts that can be accessed by a debit card
- has remained steady at 73 percent since 2007. Sixty-four percent of
consumer debit cards are active, largely unchanged from 66 percent in
2008.
"As evidenced by the performance of best-in-class issuers who have
managed to significantly outperform the market, there is clearly an
opportunity to enhance the debit experience with existing customers and
create interest with potential customers," said Ballard. "Increased
interest from debit card issuers to explore programs such as instant
card issuance will continue to promote further growth in the debit
industry."
As debit card transactions continue to increase, issuers are becoming
more concerned about how fraud and government regulation could impact
profitability. In 2009, 95 percent of debit card issuers were affected
by data breaches, making fraud mitigation a top challenge for issuers.
Issuers' average signature POS fraud losses increased 43 percent last
year from 5.2 basis points (bps) to 7.5 bps, and PIN POS fraud losses
rose by 24 percent from 0.8 bps to 1.0 bps.
"Despite the uptick in fraud, growth in the debit market remains solid,
and the 2010 study identified specific areas of opportunity for
sustaining momentum, such as business debit and rewards programs that
are more integrated with checking accounts," said Tony Hayes, an Oliver
Wyman partner, who served as project lead on the study. "The debit
market has shown resiliency despite the economic challenges, as
consumers turn to readily available funds over other payment methods."
Regulation E changes
Government regulations were cited by issuers as a major challenge for
their institutions. Changes to Regulation E (Reg E), which will take
effect this summer, will require opt-in consent before consumers can
incur overdraft charges. Overall, issuers expect 30 percent of consumers
to opt in to overdraft services, but expectations vary according to
institution size. Large banks expect 20 to 40 percent of their customers
to opt in, while many credit unions and community banks expect a much
higher participation rate, with many forecasting that more than 70
percent of customers will opt in.
With interchange and overdrafts producing approximately $118 of annual
revenue per active card, financial institutions expect that the changes
to Reg E will result in fewer approved transactions, lower interchange
income and less profitable debit card programs, impacting debit card
profitability over the next two years. In an effort to counteract
potential decreased fee income, 45 percent of issuers have already
created a plan in response to the changes.
About the Study
The 2010 Debit Issuer Study is the fifth installment in the study
series. The series provides an objective fact base on debit card issuer
performance and financial institutions' outlook for the debit card
business. Sixty-four financial institutions - including large banks,
credit unions and community banks - participated in the 2010 study,
which was conducted by Oliver Wyman. Collectively, the participants
issue 78.7 million debit cards and operate 42,063 ATMs. The sample is
representative of the U.S. debit market in terms of institution type,
location and debit network participation.
About PULSE
PULSE, a Discover Financial Services (NYSE: DFS) company, is a leading
ATM/debit network, serving more than 4,400 banks, credit unions and
savings institutions across the United States. The network links
cardholders with ATMs and POS terminals at locations nationwide. Through
its global ATM network, PULSE provides worldwide cash access for Diners
Club and Discover cardholders through hundreds of thousands of ATM
locations. The company is also a source of electronic payments research
and is committed to providing its participants with education on
emerging products, services and trends in the payments industry. For
more information, visit www.pulsenetwork.com.
SOURCE: PULSE
PULSE
Steve Sievert, 832-214-0111
[email protected]
or
GolinHarris
Tara Hanney, 713-513-9561
[email protected]