Debit-card use grew over 2011 and 2010 for straightforward reasons: consumers wanted to reduce credit card debt and more merchants are willing to accept debit cards for small transactions.
In 2010 global debit transactions made up a third of all non-cash payments, up 15% from the year before, according to the 2012 World Payments Report delivered this week by Capgemini, the Royal Bank of Scotland and The European Financial Management Association.
It notes that 2010 was the most recent full year of transaction data, and that the report is based on surveys and face-to-face interviews. The debit data does not include prepaid cards or limited-use cards, such as health insurance debit cards. The report says global non-cash payment volume grew 7% in 2010 and projects from 2011 data an increase of 8.2%.
Capgemini principal Deborah Baxley says the economic downturn sparked a change in consumer behavior.
“The reason is changing consumer behavior, not wanting to run up debt, and increasing acceptance of debit from merchants for lower-value payments,” she says. “More and more merchants, like [fast food restaurants], are accepting card payments.”
The share taken from credit card use should alert credit-card issuers to continue to innovate with such perks as rewards programs or attachment to mobile wallets, Baxley says.
“In order to keep up their revenue stream they need to come up with new ways to drive consumer usage of credit cards, in a responsible way,” says Baxley. “Obviously they don’t want to encourage the misuse of credit.”
Rewards and loyalty programs tied to debit cards have boosted use, as has debit's role as the clearing instrument underlying numerous electronic and mobile payment schemes, the report says.
While the growth of debit use is not new, it isn't slowing soon, says analyst Scott Strumello of Auriemma Consulting Group. People who cannot qualify for credit cards can turn to debit.
“The fundamentals of the two markets are a little bit different,” he says of credit cards and debit cards. “In terms of availability, debit is open to a much wider audience than credit would be.”
Strumello lists target markets as those with troubled credit histories, those too young for a credit card, and elderly people whose children are managing their finances.
