CLEARWATER, Fla.-Debit transactions continue to muscle their way in on credit cards this year, and the holiday season isn't expected to alter the trend.
That's the observation of several card processors who told Credit Union Journal that credit unions should pay closer attention to the shift and emphasize debit strategies in the coming year.
"Obviously the trend is dictating that debit is really controlling the growth in our industry today," said Bill Lehman, VP of portfolio consulting for CSCU. "So if we are just riding the credit stream we are going to lose. We need to really look at electronic payments — credit and debit — as all encompassing and have strategies on the table and be marketing both programs."
CSCU's card transaction data support Lehman's assertion. "Right now we are seeing a decline this year over last for credit in both volume and usage — to the tune of 12% on dollar volume and 7% on transactions."
In Rancho Cucamonga, Calif., CO-Op Financial Services' CEO Stan Hollen said any uptick in debit usage this time of year only supports what consumers have already made up their minds to do. "The call has been made by consumers, and it is debit," Hollen said. Citing national numbers, Hollen added that 2009 marks the first year debit has surpassed credit. "This year 52% of card payments were for debit and 48% for credit."
What may be quickening the move to debit, reminded a number of card processors who spoke with Credit Union Journal, are consumers using debit to reduce reliance on credit. But lately, banks running up card rates and cutting lines of credit could be having the biggest affect on debit's rise. "I think that is scaring consumers who are looking for alternatives," offered Hollen.
The Strength of Debit
Debit's strength is apparent, said Tom Gandre, PSCU Financial Services chief debit officer. "PSCU is running just a little under 22% growth in debit transactions over the prior year."
Another driver, Gandre said, is credit union member growth and corresponding checking growth. "It's interesting," he said. "We are up 9% over the prior year in terms of organic (debit) growth. So credit unions are doing a terrific job of bringing in new checking accounts."
While debit is positing strong numbers at PSCU credit unions, credit may not be declining as quickly as some have forecasted, according to Glenn Schechter, director of credit services for the St. Petersburg, Fla.-based PSCU.
"This year we have growth in credit cards at about 7%, which for those who have prognosticated that credit cards are a declining or dying product are wrong. And our credit card transactions are up by almost 6% over last year, which is good."
What will the holidays bring? Jeff Russell, VP of strategic development for The Member's Group in Des Moines, Iowa, shared some insights.
"First Data released their consumer spending data just for the Black Friday weekend," he said. "They combined credit and signature debit transactions together in their data and reported on PIN transactions separately. They reported credit and signature debit transactions rose 5.8% and PIN was up 8.9% over last year's Black Friday weekend. But the dollar volume of credit and signature debit only went up 2.5%, and PIN increased 7.6%. So it seems that we are seeing more consumer transactions but not the associated growth in dollars."
