A new, national survey of U.S. debit card users sends two clear messages to the electronics payments community and retailers, according to analysts:
1.) Card users have definite opinions on their preferences for payment methods, and can be classified into several distinct categories.
2.) Regardless of which payment method is preferred, consumers are virtually united in opposing any developments that would interfere with the use of their debit cards, and many are willing to change where they shop should such restrictions be enacted.
In the new study, which was commissioned by PULSE EFT Association and conducted by Analytica, Inc., consumers "demonstrated unexpected levels of loyalty to and satisfaction with their preferred payment method and provided feedback about possible changes in the payments system such as reduced acceptance of debit cards and the possible assessment of new debit fees," said PULSE.
Participants were asked which of six payment methods they use most in three retail settings: grocery stores, gas stations and large retailers. The payment methods identified were PIN debit, signature debit, cash, major credit card, check and store charge card.
"Respondents' answers revealed that they are more likely to choose one payment method over the others and are inclined to use it across these retail settings, rather than varying their payment method with the type of store," the company said.
"The degree to which consumers are loyal to their preferred payment method has become striking, especially in the case of debit," said PULSE President and CEO Stan Paur. "The survey confirmed some of our long-held beliefs about why consumers are increasingly adopting debit payments."
The survey findings regarding payment method loyalties enabled Analytica to segment the responses by respondents' preferred payment vehicles. When the results were analyzed separately by these segments, PULSE said a number of new insights emerged, including six payment loyalty segments:
* Respondents who say they pay most often with PIN debit (23.5% of participants).
* Those who pay most often with signature debit (17%).
* Those who use a debit card most but place less emphasis on the verification method employed (13.8%).
* Those who pay with credit cards most (17.8%).
* Those who pay most often with cash (15 %).
* Those who pay with checks most (12%).
According to the survey, when consumers choose debit over other payment methods, it is chiefly because they believe it is faster and easier. The second most frequently cited reason for choosing debit is avoiding credit balances and interest. "The option to receive cash back was rated much lower, and sweepstakes and promotions have little impact on the choice of payment among debit users," said PULSE.
PULSE reported that the study found that check users express some concerns with checks, suggesting that individuals in this group may be converted to paying with debit. "Among people who pay predominately with cash, given a choice between check, credit card and the two types of debit, these individuals indicated a preference for PIN debit. As a result, they also would appear susceptible to transitioning to the use of PIN debit."
In addition, the survey revealed some relevant findings for merchants that accept debit cards: regardless of their preferred payment method, consumers are almost universally opposed to actions that would inhibit the use of their debit cards.
When asked how they would respond if a merchant stopped accepting their debit card, 81.4% of participants said they would be "very unhappy," and 29.7% said they would stop using the merchant.
If merchants began charging to accept debit cards, 79.2% of respondents would be unhappy, and of those, 37.4% said they would switch to a different payment method and 21.2% said they would stop using the merchant.
Similarly, if financial institutions began charging a fee for debit card payments, 85.3% of respondents reported they would be "extremely dissatisfied," and 43.7% said they would change institutions.
"Banks and credit unions can use this information when making decisions about their card programs. Retailers also will find helpful an awareness about the likely consumer reaction to potential changes in payment acceptance and fees," said Paur.
CUJ Resources
For more info on this story, visit www.pulse-eft.com. The full study is available to PULSE members at no charge.
