Debit Zeros in on Credit

  Within the next two years, the combined use of PIN- and signature-debit cards at the point of sale will surpass that of credit cards, suggest data contained in the 2006 edition of the ATM&Debit News EFT Data Book, which was published Sept. 15. ATM&Debit News is a Cards&Payments sister publication also published by SourceMedia.
  In March, overall PIN-debit purchases switched by the nation's electronic funds transfer networks grew by 29.3%, to 676.2 million transactions from 522.8 million in March 2004, according to the data book. PIN-debit volume on an annualized basis is projected to reach 8.1 billion transactions by the end of this year.
  Signature-based, or offline, debit volume is projected to grow by about 14.6% by the end of 2005, according to mid-year transaction data supplied by MasterCard International and Visa U.S.A., the sole offline-debit brand sponsors in the U.S. ("Debit Volumes Continue to Mount, 9/05). ATM&Debit News projects total annual offline debit volume will reach 12.9 billion transactions by the end of the year.
  As a result, a combined 21 billion PIN- and signature-based debit card purchases will be initiated this year, just shy of the projected 23.5 billion transactions initiated this year among holders of credit cards carrying the MasterCard, Visa, American Express and Discover brands, according to the data book. The 2005 credit card transaction total represents a 6.3% rise from the 22.1 billion credit card purchases U.S. consumers initiated in 2004.
  At their current growth rates, overall total annual point-of-sale debit volume will reach about 25.3 billion transactions by the end of 2006. That would compare with 24.9 billion credit card transactions projected to be initiated next year.
  Trends noted in the data book generally show a continued shift toward using plastic instead of cash and checks, say analysts. Moreover, debit cards, and not credit cards, are becoming the payment card of choice for routine consumer purchases in which cash and checks are not used, observers say.
  "Cash and checks are a pay-now type of transaction, and debit is the most natural transaction type to replace them," says Tony Hayes, vice president of Boston-based Dove Consulting.
  The debit totals do not include ATM transactions. ATM volume, including bank on-us activity, still exceeds PIN-debit purchase volume, though ATM volume declined 4.6% in March from the previous March.
  The nation's largest EFT network, Star, experienced a 14.2% decline in ATM transactions switched in March from March 2004. Most other networks experienced either single-digit increases or a decline in ATM volume.
  EFT networks do not switch on-us transactions, which are initiated by a bank's own customers. Many consumers use their own bank's ATMs to avoid paying surcharges imposed by other ATM owners.
  Jeff Sachs, Visa senior vice president, says the decline is a direct result of consumers using their debit cards more for what were formerly cash-and-carry transactions.
  (c) 2005 Cards&Payments and SourceMedia, Inc. All Rights Reserved.
  http://www.cardforum.com http://www.sourcemedia.com