Shoppers Flocking to Debit Cards

Forecasts Rosy as Payments Surge by 69% in 1990

NEW YORK -- Consumers used their automated teller machine cards to pay for goods and services 2.9 million times a month in 1990 - a 69% increase over transactions the preceding year.

Included in a study by Speer & Associates Inc., the finding suggests point-of-sale services may grow substantially in the coming decade. The authors predict that direct-debit transactions will overtake ATM interchange transactions - initiated when one bank's customer uses a machine belonging to another bank - by the second half of the 1990s.

Steady Growth Seen

"From the mid-1980s going forward, we've been seeing a steady growth of POS terminals, cardholders, and stores," said Ron Dennis, a senior vice president at Atlanta-based Speer. "If you look at the raw potential that is out there, it is really very large."

The number of direct-debit terminals installed at U.S. retailers rose to 102,344 in 1990, a 35% increase over the previous year.

That's good news for banks and their electronic funds transfer networks. As more transactions are pushed through the shared ATM systems, the systems will be less expensive to operate.

Further Cost Cuts Needed

According to Speer, shared networks now spend 8 cents to 12 cents for each shared transaction. To operate most efficiently, transaction costs should drop to the 5- to 11-cent range, Speer said.

"The networks have been trying for years to stimulate volume to spread across their fixed costs," Mr. Dennis said. Growth of direct-debit transactions will help them raise volume and therefore reduce costs.

The annual report is the sixth from Speer on the rankings and performance of the nation's biggest electronic funds transfer systems. The company reported a 69% response rate from among 78 networks.

Gains Despite Maturity

Speer's findings indicate that the country's 20 largest networks - despite their maturity - continue to enjoy significant growth in the number of interchange transactions they handle.

For the third consecutive year, the top 20 reported greater growth in interchange volume than in their cardholder bases. The group's monthly interchange volume climbed 23% in 1990, to 115.7 million.

The top five - CoreStates Financial Corp.'s Mac, the New York Cash Exchange, the Southeast Switch, Star System Inc., and Jeanie - saw interchange volume soar 31%, to 59.5 million.

Volumes are also growing fast at the national ATM systems. Cirrus System Inc., Downers Grove, Ill., reported handling 8.4 million interchange transactions a month last year, a 71% increase over 1989. At Denver-based Plus System, monthly interchange hit 4.7 million, a 52% jump. [Graph Omitted]

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