Survey Shows Consumers Prefer PIN To Signature

Register now

The STAR Consumer Payments Usage Study found card users prefer PIN-based transactions to signature-based, another indicator that debit transactions are starting to win out over the more traditional signature credit model.

The survey, released by First Data Corp., suggests retailers and financial institutions alike must offer a full complement of payment options for consumers.

According to the 2004 survey, nearly half of consumers prefer PIN-secured transactions at point of sale, compared with 30% who prefer the signature-based method.

Survey respondents largely cite increased security as the number one reason for choosing to use their PIN numbers to make purchases (46%).

More than five out of every six ATM/debit cardholders surveyed had used their ATM/debit card at an ATM or at the POS at least once in the 30 days prior to the survey.

But that's not to say it's time to get rid of signature-based credit transactions, as 29% of non-debit users surveye say credit cards are their preferred means of payments, up 11% over 2003.

Debit users are the least likely to pay with check, while non-users still report that they wrote an average of three checks per month at retail.

"Our research shows that consumers prefer to make PIN-secured payments at the POS. STAR is addressing this preference by working with merchants to PIN-enable new types of retail outlets such as quick service restaurants, movie theaters, newspaper stands, laundries and parking facilities," added Janssen. "By offering a comprehensive electronic payments solution to our customers, financial institutions and retailers of all sizes can offer choice to their customers."

Other findings include:

* Those consumers who use both PIN-secured and signature debit, nearly 6 out of 10 consumers, reported that they use their cards more on average, 21.4 times per month.

* Those who use only signature debit say they use their cards 13.4 times per month and those who use PIN-secured debit only report using their cards 9.0 times per month.

* An increase in debit card use at the POS is good news for retailers. When consumers use debit cards, they spend more. Debit purchases are 32% higher compared to cash and 24% higher compared to checks. Grocery stores, gas stations and specialty retail locations are the most likely to benefit, as they are the most popular outlets for PIN-secured debit payments.

* Identity theft and fraud continue to be a concern for consumers. One-quarter of consumers surveyed, regardless of ATM and card usage habits, say they are extremely concerned about their exposure to fraud and their personal safety when using an ATM. Overall, less than one-fifth of debit card users surveyed are aware of zero liability from any type of debit card losses. However, when asked about personal liability and exposure to fraudulent purchases, consumers were equally likely to expect zero liability from signature debit and PIN-secured debit purchases. Financial institutions have an opportunity to better educate their cardholders about the protective features of their cards.

Loyalty Program Opportunities

* An opportunity also exists with loyalty programs. While the number of programs is growing, more can be done to make consumers aware of reward programs available. Just 17% of respondents knew of a POS-based rewards program offered by their financial institution. However, once aware, nearly half (46%) enroll, indicating that financial institutions may realize significant benefit by better educating their customers about their loyalty offerings. Customized communications are key to strengthening the issuer-cardholder relationship.

* New technology services can also be a customer retention tool, as consumers say they appreciate being able to do banking at home. Online bill payment continues to grow with 32% of consumers surveyed reported paying bills online, an increase from last year's 27%. And, survey respondents rank the ability to do banking transactions, transfer funds and review statements from a home computer (5.7) as the most appealing technology being offered by their financial institution. The opportunity also exists to transform traditional communications methods into interactive relationship-building tools.

* Consumer usage of store gift cards and pre-paid cash cards is on the rise. More than one-third of consumers surveyed indicated their use of a store-specific gift card to make a purchase in the past 12 months (40%) and nearly 20% of consumers have used a pre-paid cash card. Significantly more respondents have used a pre-paid cash card and a store gift card in 2004, both increasing by at least four-percentage points over 2003.

* Two-thirds of respondents reported they received the card as a gift (67% who used a pre-paid cash card and 80% who used a store gift card).

Similar to stored value cards used, 39% of consumers surveyed have purchased a store-specific gift card in the past 12 months and 23% had bought a pre-paid cash card, significant increases from the previous year's 37% and 19%.

For reprint and licensing requests for this article, click here.