Debit Industry Changes Markedly in 10 Years of Debit Issuer Study
August 06 2015 - 8:00AM
Business Wire
Typical Debit Card Is Used 21 Times per Month
at POS, a 32 Percent Increase in Usage Over the Past Decade
The 2015 Debit Issuer Study, commissioned by PULSE, one of the
nation’s leading debit/ATM networks, highlights the underlying
trends that have contributed to the rise of debit during the 10
years since the study was introduced. The analysis of the past
“Decade of Debit” finds the use of debit increasing significantly
at the point of sale:
2005
2014
Monthly POS Transactions 16.1 21.2 per Active Debit
Card Annual Spend per Active $7,807 $9,291 Debit Card
Average Ticket Size $40 $37 Monthly ATM withdrawals 3.4 2.0
per Active Debit Card
“The past decade saw a major shift in consumer preference to
paying with debit cards, which accelerated after the 2008-2009
recession,” said Steve Sievert, Executive Vice President of
Marketing and Communications for PULSE. “We believe there is still
opportunity for debit growth, considering that consumer use of
debit for smaller purchases is rising, and the average active debit
card is used about five times per week.”
Debit extends lead as Americans’ preferred payment
method
Ten years ago, debit cards had just overtaken credit cards as
consumers’ most commonly used payment method. Now, there are over
50 billion PIN, signature and prepaid debit transactions in the
U.S. every year, according to the Federal Reserve − almost twice as
many as credit, the next most commonly used non-cash payment
method. The average active cardholder conducted 23.2 debit
transactions (POS and ATM) per month last year, according to the
study.
During this decade, the average debit cardholder increased usage
of debit at the POS by 32 percent. In the same timeframe, card use
for ATM withdrawals declined by 41 percent.
“Consumer use of debit has been nothing short of remarkable,”
said Tony Hayes, a partner at Oliver Wyman, who co-led the study.
“Debit has steadily gained wallet share as consumers shift their
spending to this payment type. The use of debit for small-ticket
purchases is particularly noteworthy, where one-third of all debit
transactions are for less than $10 – purchases that historically
would have been made with cash or not at all.”
Debit economics
Ten years ago, financial institutions reported receiving a
weighted average interchange of $0.41 for each consumer debit
transaction. The introduction of Regulation II, which went into
effect in the fourth quarter of 2011, fundamentally changed debit
economics.
The interchange rate cap in Regulation II limits per-transaction
interchange to large issuers (≥$10 billion in assets), while
issuers with less than $10 billion in assets are exempt from this
requirement. In 2014, regulated financial institutions earned a
weighted average of $0.24 per debit transaction, and exempt
financial institutions earned $0.40, according to the study.
In addition to tracking debit interchange rates, the study also
reports on debit revenue, beginning in 2008. In that year, debit
issuers earned an average of $81 in annual interchange income per
active consumer debit card.
According to this year’s study data, exempt issuers generated
average annual debit interchange revenue of $112 per card.
Regulated issuers received average interchange income of $59 per
card, with transaction growth helping to offset a portion of the
impact of lower per-transaction rates.
“Debit continues to show resilience as a preferred payment type
by consumers,” said Sievert. “The study reveals that debit remains
a key source of non-interest income for both regulated and exempt
financial institutions at current interchange rates and card usage
levels.”
Account acquisition, retention
For the first time, the study collected information on the rate
at which financial institutions acquire new account holders as well
as lose existing ones, since both influence the total debit card
base. Approximately one in five U.S. account holders switches
financial institutions each year.
In aggregate, the U.S. banking industry issues 165 million new
debit cards per year. The mass reissuance for data breaches and
cards for new customers are the two largest drivers of this
demand.
About the study
The 2015 Debit Issuer Study is the 10th installment in the
series and was conducted by Oliver Wyman, an independent management
consulting firm. The study provides an objective fact base on debit
card issuer performance and financial institutions’ outlook for the
debit card business. Seventy financial institutions – including
large banks, credit unions and community banks – participated in
the study. Collectively, the participants issue approximately 147
million debit cards, representing approximately 47 percent of total
U.S. debit transactions. The sample is representative of the U.S.
debit market in terms of institution type, geography and debit
network participation.
About PULSE
PULSE, a Discover Financial Services (NYSE: DFS) company, is one
of the nation’s leading debit/ATM networks. Financial institutions,
merchants, processors and ATM deployers across the United States
and around the world depend on PULSE’s comprehensive suite of
products and services and its commitment to providing exceptional
client service, flexibility, security and superior economics. PULSE
also is a resource for debit education, research and knowledge
drawn from more than three decades of industry experience. For more
information, visit pulsenetwork.com.
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version on businesswire.com: http://www.businesswire.com/news/home/20150806005068/en/
PULSEPatty Sendelbach, APR, (832)
214-0395patty.sendelbach@pulsenetwork.com
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