Debit to Overtake Credit in 2006

  Debit card purchases this year will leave credit card transaction volume in the rearview mirror, according to the upcoming 2007 edition of the ATM&Debit News EFT Data Book.
  The C&P sister publication projects that PIN-based and signature-based, or offline, debit purchases will reach a combined 26.6 billion transactions at the point of sale this year. That will compare with a projected 24.2 billion credit card transactions initiated with Visa, MasterCard, American Express and Discover cards.
  The offline debit transaction projections are based on mid-year totals for Visa check card and debit MasterCard. PIN-debit projections are based on the combined March purchase volume of the EFT networks that switch the transactions. Both totals account for increased spending during the holidays.
  Analyst Robert Dodd calls debit volume surpassing credit card activity a "big deal," but he stops short of calling it a "watershed" event. "It was expected," says Dodd of Morgan Keegan & Co.
  Dodd cites a report Visa USA released a year ago in which the San Francisco-based payments association said its signature-based check card purchases were running ahead of its credit card activity at the point of sale.
  Todd Strubbe, who recently was named president of First Data Debit Services, which owns the Star EFT network, says both PIN and signature use is growing because it provides consumers with a convenient choice. "It's very clear that consumers prefer to have options when it comes to electronic payments," he says.
  A recent Star consumer payments survey indicated that, when consumers are given the choice of using either a PIN or a signature at the point of sale, they initiate more debit transactions as a whole, Strubbe notes.
  Consumers who use both PIN- and signature-debit methods for purchases conduct an average of 22.7 transactions per month. That compares with 14.4 transactions per month among consumers who solely use signatures and 10 per month for those who use only their PINs, the Star survey found.
  Morgan Keegan's Dodd says young consumers in their 20s are among the key drivers that have propelled debit card use to the point of overtaking credit card purchases. "They were brought up on debit cards. They wouldn't think twice about using their debit cards to buy a soda," Dodd says. "My parents, on the other hand, wouldn't dream of using a card to pay for a soda."
  PIN-debit purchases are projected to exceed 10.4 billion this year. That would represent 22% growth from the restated 8.5 billion PIN-debit purchases initiated in 2005, according to the Data Book.
  Total PIN-debit volume, including ATM transactions, on an annualized basis is projected to reach 20 billion transactions by year end, up 7.5% from 18.6 billion in 2005.
  ADN projects that signature-debit purchases will reach 16.2 billion transactions this year. This would represent an increase of 21% from the 13.4 billion offline debit purchases initiated in 2005.
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