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Consumers Continue to Embrace Debit as Digital Payments Expand

Young woman looking at her mobile phone while strolling through an outdoor market

The consumer appetite for digital payments continued to grow in 2022, even after the surge that took place during the previous two years. What began as a pandemic-fueled shift away from in-person, card-present transactions has become a growing preference for digital alternatives, even at the physical point of sale. 

Indeed, increased use of mobile wallets, contactless cards, and account-to-account (A2A) transactions are among the top trends revealed in the 2023 PULSE® Debit Issuer Study

“The trends we’ve seen in the past few years have solidified, as consumers increasingly rely on the convenience and control found in today’s digital debit options,” said Steve Sievert, PULSE Executive Vice President of Marketing and Brand Management. “And the industry is taking note. Debit issuers are focusing their resources on not only supporting these alternatives but also on enhancing the customer experience through digital self-service options.”

This year’s study, commissioned by PULSE and conducted by West Monroe, offers insights into key areas such as card and transaction mix, the continued digitalization of debit, issuer priorities, and other trends. 

CNP growth slows amid POS shifts

Card-not-present (CNP) transactions increased more than 3% year-over-year (YoY) in 2022 – higher than overall debit growth of 1% but a decline from the 6% growth seen in last year’s study. Nevertheless, these digital purchases and payments still account for one-third of debit transactions. In fact, whether by entering card details or using stored card data in a digital wallet or payment app, the average active cardholder conducts 9.5 CNP purchases, payments and transfers per month.

Some notable shifts occurred on the card-present (CP) side as well. While mobile wallet use at the physical point of sale nearly doubled, accounting for 9.8% of all debit transactions in 2022 versus 5.3% in 2021, consumers continued to use their physical card most of the time. In fact, debit cardholders used their card for CP purchases an average of 19.6 times each month, representing two-thirds of debit transactions.

PIN-authenticated CP transactions declined by 7.6% YoY in 2022. This decrease reflects growing use of mobile wallets and card-not-present options.

 Graph shows transaction mix by authorization method comparing 2021 to 2022. In both years, 32% of transactions were card-not-present. The percentage of card present via mobile wallet transactions increased from 5% in 2021 to 10% in 2022. Card present with pin transactions decreased from 41% in 2021 to 37% in 2022. Card present with signature or no CVM dropped slightly from 22% in 2021 to 21% in 2022.

Issuers focus on enabling mobile wallets

Consumer use of mobile wallets is growing beyond just in-store use. Nearly 80% of issuers reported seeing a jump in overall mobile-wallet activity in 2022, according to the study. 

In response, issuers are spending both time and resources in this area as they strive to remain top of wallet in today’s digital-first world. “As consumers continue to embrace the convenience and security of mobile payments, it will be important for debit issuers to ensure their cards are accessible in the most popular digital wallets,” said Sievert.

Encouraging consumers to use debit in mobile wallets is among issuers’ top priorities, prompting them to make the promotion of mobile wallets a key focus of their marketing campaigns.

Debit A2A transfers expand 

Debit has also become a popular payment option for A2A transfers over the past several years. Debit A2A payments grew a further 6% YoY in 2022. While this is a healthy growth rate, it is considerably less than the more than 20% YoY growth seen by this same cohort of issuers in 2021.

A2A growth occurred as payments providers made it easier and more convenient to transfer money digitally. Consumers are also more comfortable transferring money through digital channels, including larger sums. Both Account Funding Transfers (AFTs) and Original Credit Transactions (OCTs – known as Account Credit Transfers on the PULSE network) — increased in 2022, although growth in AFTs slightly outpaced OCT growth, the study noted.

The continued increase in A2A volume is fueled by a combination of transaction types, including peer-to-peer payments, business-to-consumer disbursements, and gig-economy wage payments. 

“People are using OCTs to be paid; for example, Uber drivers and people who want to get paid in real time. That’s an interesting shift … just completely different than debit card usage five years ago.” 

– Large Bank Executive

Contactless use continues to climb

Consumers and businesses are expanding their use of contactless payments. The percentage of contactless transactions rose to more than 16% of CP POS volume – nearly double the percentage of transactions from the previous year. 

Issuers are responding to this rising cardholder adoption by accelerating their rollout plans. Two-thirds of issuers surveyed have rolled out contactless debit to at least half of their cardholders. Some reported that this was one of the most impactful improvements they made in 2022. 

The data showed that 70% of all debit cards are now contactless-enabled – a jump of 14 percentage points from the prior year. And while issuers are in varying stages of their contactless journeys, contactless penetration and use are expected to rise further as more issuers make this technology available to keep pace with cardholder demand. 

 Graph depicts card present transaction share by payment method. EMV/Chip transaction share dropped from 71% in 2021 to 64% in 2022. The share of swipe transactions remained fairly consistent with 22% in 2021 and 21% in 2022 and the share of contactless transactions increased from 8% in 2021 to 16% in 2022.

Looking at digital trends in debit going forward 

As consumers become accustomed to payment technology changes, demand for faster, more-convenient services will continue to expand. Consumers are especially interested in enhanced banking services they can access via mobile devices, including self-service capabilities, faster payment alternatives, and increasing compatibility with leading digital wallets.

Today’s debit issuers are prioritizing enhancements to these digital experiences. And issuers are looking for ways to ease friction for cardholders. They recognize that debit programs need to keep pace with these broader advances in financial services to match evolving consumer behaviors and expectations.

Watch the webinar to hear more about key findings from the 2023 PULSE Debit Issuer Study.

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