BY THE NUMBERS
Payments: Growth of Debit-Card Use Outpaces Credit Cards
Are Americans outgrowing credit cards? For the past few years, debit-card usage has grown by double digits, far ahead of credit cards. Meanwhile, check use is fading fast.
Bank Technology News | December 2007
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The U.S. economy may be slowing, but debit-card usage remains strong and is growing. In a recently published report, TowerGroup found that debit-card transactions grew three times faster than credit cards between 2005 to 2007, a trend the firm expects will continue through 2009.
Despite fears of a recession and declining consumer consumption, TowerGroup estimates that debit-card use will grow to nearly $180 billion in 2008, up an approximate $30 billion from this year. That's thanks in no small part to the fact that 90 percent of households with bank accounts have a linked debit card.
TowerGroup has identified what may be a fundamental shift in behavior away from credit to debit. Many consumers paid down their credit-card balances during the mortgage-refinancing boom, TowerGroup says, and now instead of reloading those cards, they are using debit to pay for daily expenses like gasoline and groceries.
TowerGroup estimates that more than $2 trillion will be spent globally in the card-payments industry. Debit cards have continued to dwarf credit's compound annual growth rate and have exceeded credit cards in the sheer number of transactions since 2005. PIN debit, for instance, has grown 18 percent between 2005 to 2007, while credit cards' volume grew just five percent and checks declined a remarkable nine percent.
Debit cards have gone from one percent of the total payment-method share in 1995 to 15 percent 10 years later, says Aite Group. The success of debit cards has prompted competition and opened new opportunities. Aite cites Capital One's decoupled debit card, which uses the ACH network to connect to accounts at any bank, as a significant development. Overall, TowerGroup adds, there is enormous growth potential for debit cards in person-to-person payments, cards for teenagers, and payment for government benefits. (c) 2007 Bank Technology News and SourceMedia, Inc. All Rights Reserved. http://www.banktechnews.com http://www.sourcemedia.com
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