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PULSE® Perspectives – December 2023

An middle-aged woman smiles at another person as she makes a payment using her mobile phone

Each quarter, PULSE looks at the trends shaping the world of debit and shares insights on recent developments impacting issuers. In this edition, we examine why debit remains a preferred method of payment and review research that highlights the growing popularity of gift cards – particularly as a budgeting tool. We also explore the impact rising ATM fees have on card usage and the customer experience.

Consumer Preference for Debit Persists

Digital Transactions reports a study from J.D. Power found that debit remains the most widely used form of payment, despite the availability of new digital payment types. Survey findings show 78% of consumers use debit cards at the point of sale, followed by cash (74%), and credit cards (66%). Consumers say debit helps them monitor spending, accelerates the transaction, and offers ease of use. A key reason credit ranked behind debit is the growing popularity of buy now, pay later (BNPL) options, which 28% of consumers now use.

PULSE Perspective: Consumers gravitate toward debit even more when facing financial uncertainties. The rise of BNPL could be partly due to the relative lack of regulation of the space, which may be nearing an end.

Consumers Turn to Gift Cards

Research from card platform Blackhawk Inc. found consumers plan to use more gift cards this year. The Paypers reports the number of cards is projected to rise 12% year-over-year in 2023, with consumers planning to load 7% more on those cards. The survey found 37% of respondents have purchased more gift cards for self-use, primarily to help manage spending.

PULSE Perspective: With consumers making significant changes to spending behaviors, this is a great time for issuers to roll out services aimed at budgeting and expense management.

ATM Fees Reach Record High

The average total fee for using an out-of-network ATM has hit a record high of $4.73. Bankrate’s 2023 checking account and ATM fee study found that, while ATM fees are on the rise, the average overdraft fee dropped to $26.61, the lowest in nearly two decades. The study also showed that 45% of noninterest-bearing checking accounts are free, a slight decrease from 2022. 

PULSE Perspective: While high fees discourage cardholders from using another deployer’s ATMs, institutions must find the right balance between generating revenue and ensuring a positive customer experience. This is especially true in the current regulatory environment, in which the Consumer Financial Protection Bureau has been critical of excessive fees.