US Debit Card Opportunities and Challenges

Roughly three-fourths of U.S. consumers have one card association-branded debit card that is tied to their primary bank account. The debit card is therefore at “top of wallet” for these consumers, making them unlikely to switch debit cards for a “better offer” as they more readily do with credit cards. Debit activity gives the primary bank opportunities to increase loyalty and wallet share.

“To some extent, debit card usage has replaced check writing,” states Leon Majors, President of Phoenix Payments. “But debit is also replacing cash and credit cards. Increased debit card transactional activity is requiring cardholders to maintain larger bank account balances to draw upon for their payments.”

The preference for debit cards over credit cards to pay bills is strongest among middle-aged and lower-income consumers. Older consumers and those with incomes above $100,000 are evenly divided in their preferences for the two card types.

“As the customer’s debit card use increases, transactional activity with the primary bank increases as well,” continues Majors. “Debit card usage at point-of-sale will continue to grow. PIN debit has particularly strong growth potential at walkup centers and for recurring bill payments.”

Phoenix’s annual Consumer Payments Preferences Study was conducted online in late 2007, surveying slightly more than 2000 consumers with a national representation of the online U.S. population. Phoenix Payments will present its detailed findings at the NACHA Conference in Las Vegas May 18-21. For an executive summary of the research, please visit http://www.phoenixmi.com/pdf/PhoenixConsumerStudy-ExecSummary.pdf.