“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.”
