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PULSE Perspectives - June 2024

A road stretches to the horizon with the sun and clouds in the background

PULSE offers its perspective on news, analysis, and research in payments and banking. In this issue: debit tops mobile-wallet funding methods, ABA warns of the impact of lowering debit interchange, and real-time payments progress slows.

Debit Tops Mobile-Wallet Funding Methods

Payments Journal reports that consumers turn to traditional payment methods when funding their mobile wallets. Javelin Strategy & Research’s report, Incentivizing Consumers Toward Debit Payments with Rewards, identified debit as the top choice to fund mobile wallets. Debit cards are used as a funding method by 65% of consumers, compared to 53% for credit cards, and 36% who maintain a balance in their wallet. Over one in four (26%) use direct debit from a bank account, and 16% use prepaid cards to fund a mobile wallet.

PULSE Perspective: Issuer efforts to encourage consumers to add their debit card to digital wallets appear to be paying off. Even better, once a card is top-of-wallet, it usually stays there.

ABA Warns of Impact of Lowering Debit Interchange

ABA President and CEO Rob Nichols says all financial institutions will be hurt by the Federal Reserve’s proposal to lower the cap on debit interchange. Nichols pointed to a recent survey of bank executives from IntraFi that found 31% of respondents will face lower revenue if the proposed changes are finalized. He also pointed out that debit interchange dropped by about 35% for smaller institutions when Reg II took effect.

PULSE Perspective: Regardless of the Fed’s ultimate decision, we are confident debit’s popularity will continue to grow, and that all stakeholders – cardholders, merchants, and financial-services providers – will continue to benefit from its use. See our recent article on preparing for the Reg II changes.

Slow Progress in U.S. on Real-time Payments

Payments Dive examined a report from payments processor ACI Worldwide, It's Prime Time for Real Time. It said that real-time transactions in the U.S. increased a modest 25% YoY in 2023. The U.S. ranked 11th worldwide in terms of real-time payments adoption, based on total 2023 transactions. The report stated, “Real-time payments are still in their infancy in the U.S., accounting for only a 1.5% share of the total payments volume in 2023.”

PULSE Perspective: The positive and negative impacts on consumers and businesses from faster payments are uncertain. Payments stakeholders will want to watch as this channel develops and closely monitor the operational and financial effects.