Debit remains the preferred payment type for everyday spend, and there are no indications the trend is slowing. In fact, consumers are expanding their use of debit across a wider range of transactions.
“Despite all the changes that have occurred in our industry – or perhaps because of them – debit continues to thrive,” said Steve Sievert, Executive Vice President, Marketing and Brand Management at PULSE. “Consumers are embracing debit across a variety of transaction channels. Not only has debit card penetration exceeded 80% for the first time, but we’re seeing debit usage per active cardholder rise year-over-year along with average debit ticket size.”
Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group, added, “Unsurprisingly, consumer payment habits that took hold out of necessity during the COVID-19 pandemic have become even more established. Debit users value the convenience offered by their cards and have become increasingly comfortable using them for non-POS transactions.”
Those are but some of the observations from Sievert and Grotta regarding the 2022 PULSE® Debit Issuer Study, commissioned by PULSE and conducted by Mercator Advisory Group. Among their conclusions, they identified five of the top trends in the debit industry emerging from the research.
1. Growth in debit use remains strong
The new data shows that choice of debit by consumers and businesses showed strong growth from 2020 to 2021 – part of a trend expected to continue. Overall dollar volume jumped 9% while the number of transactions increased 5% over the 2020-2021 period, results from the 2022 PULSE® Debit Issuer Study show. In all, total purchase volume on debit could soar 60.7% from 2020 to 2025, the Nilson Report has estimated.
According to Grotta, after shifting more payments to debit during the COVID-19 pandemic, “Consumers are now using their debit cards for a growing range of card-not-present transactions. In addition to making debit purchases at online retailers, they are choosing debit for curbside pickup orders, often within the retailer or restaurant app. Historically, these purchases trended to other payment methods.”
“Despite all the changes that have occurred in our industry – or perhaps because of them – debit continues to thrive,”
Steve Sievert, Executive Vice President, Marketing and Brand Management at PULSE
2. Account-to-account (A2A) activity is on the rise
With the growing popularity of peer-to-peer payments, more consumers are turning to A2A transactions to send money to a friend or family member, and many are choosing debit as the default source or destination for such transactions.
Grotta said she encourages issuers to pay concerted attention to their customers’ A2A activity. According to a previous Mercator study on consumer debit industry trends, 17% of debit users plan to use their debit cards for peer-to-peer payments. And on the deposit side, financial institutions increasingly see insurance providers using A2A to make settlement payments, or gig economy employers paying workers directly into their checking accounts.
“Many issuers expect A2A to continue its trajectory, becoming an even bigger slice of the debit pie,” Sievert said. “And we’re proud to be part of that as the speed and reach of networks such as PULSE are enabling a wider array of use cases for P2P and B2C payments.”
3. Consumers enjoy the convenience and security of card-not-present (CNP) debit transactions
CNP transactions grew to 33% of total debit transactions in 2021, up from 31% in 2020, based on data from the 2022 PULSE® Debit Issuer Study. While there are some signs that e-commerce growth could be slowing in the face of an economic slowdown and higher inflation, the trend of consumers turning to debit for online purchases is likely to continue.
“In the past, consumers were concerned about fraud in CNP channels,” said Grotta. “We’re past that now, as financial institutions have stepped up their ability to recognize fraud, rapidly process disputes and return funds to customers when appropriate.”
This improved issuer responsiveness gives consumers the confidence to use their debit cards in CNP channels, she said.
4. Many financial institutions anticipate issuing 100% of their cards as contactless within the next two years
While contactless payments are not yet broadly embraced by consumers, that dynamic will evolve as issuers continue to shift toward contactless cards, Grotta said. Issuers are already beginning to wrap up their issuance of cards that have both contact and contactless capabilities and expect to fully transition to contactless payments within two years.
“Issuers are certainly doing their part,” Sievert said, and though consumers are adapting more slowly, their usage is growing. “We’ve been tracking contactless issuance and use for several years now, and it has been a slow burn on the consumer end of the equation. Yet, even with only 6% of debit transactions being conducted this way, it’s important to note this is a dramatic increase from 1.6% the previous year.”
In line with the distribution of more contactless cards, Grotta also expects the technology to quickly become more reliable and easier to troubleshoot. Issuers and merchants could benefit from improved signage to explain usage at the point-of-sale.
5. Fraud attacks are more sophisticated, and financial institutions must continue to adapt
As the industry has witnessed increasing fraud attempts, issuers have been fighting back. “Fraud really ramped up in 2021 and caught some issuers by surprise,” said Grotta. “Issuers are doing a good job of keeping their losses in check, but the sheer volume of fraud attacks has taken a lot of resources to manage.”
Fraud activity originating from social engineering is happening at scale, and the criminals continue to improve their techniques. Issuers need to understand where fraudsters are focusing their efforts at any given time and get that data into their fraud-detection systems to flag suspicious transactions and protect cardholders.
The agility of fraudsters demands quick action on the part of issuers, Grotta said, which explains why many have made significant investments in fraud-mitigation tools to keep their loss rates under control – particularly over the course of the COVID-19 pandemic.
This year’s study reveals additional emerging trends. These include the growing focus on financial institutions’ self-service capabilities and the longer-term movement toward sustainable debit cards.