Momentum building for e-commerce,
person-to-person and other payment types
Consumers are paying with debit more often, and in a wider
variety of ways, including e-commerce purchases, online bill
payments and person-to-person (P2P) payments. This was a key
finding of the 2019 Debit Issuer Study, commissioned by Discover
Financial Services’ PULSE® debit network and conducted by Oliver
Wyman.
Consumer debit use continues to grow, driven primarily by
purchases made without physical cards, according to the 14th annual
installment of the study. E-commerce and other digital transactions
grew nearly 24 percent year-over-year – more than five times faster
than debit transactions initiated with a physical card. One in four
debit transactions took place without the presence of a card in
2018, compared to one in five in 2017.
Consumers are increasingly using debit for P2P transfers,
business-to-consumer “push” payments and cardless
consumer-to-business payments, most of which take place in mobile
apps or online. Push payments are used for the disbursement of
funds in cases such as paying gig-economy workers and settling
insurance claims.
As a result of shifting payment patterns, debit use climbed to
an average of 24.8 transactions per month per active card in 2018,
compared to 23.7 in 2017. Annual spend per active card averaged
$11,684, a nearly 8 percent increase year-over-year.
“People are increasingly turning to debit whether they’re
inserting a card at the point of sale, using an app or shopping
online,” said Steve Sievert, executive vice president of Marketing
and Brand Communications at PULSE. “Looking ahead, we expect the
debit landscape to continue to evolve as issuers enhance anti-fraud
measures, respond to changing consumer payments behavior and meet
the consumer expectation of a frictionless payments
experience.”
Additional study findings include growing interest in issuing
contactless debit cards and developing digital customer-service
capabilities.
Growth in Funds Transfer Services
Although P2P transfers, push payments and other funds transfers
account for just 6 percent of all debit payments made without a
physical card, according to the study, the numbers are beginning to
add up. An estimated 1.2 billion such payments were completed via
debit cards in 2018, nearly all of which was incremental
growth.
“These are truly ‘faster payments’ that enable individuals and
companies to send and receive funds quickly and easily,” said
Judith McGuire, executive vice president of Product Management at
PULSE. “We’ve had tremendous success with our account credit
transfer service, for example, which uses a debit transaction to
push money to consumer accounts.”
Interest in Contactless Cards
The percentage of debit issuers that say they are interested in
offering contactless cards nearly doubled year-over-year, with 70
percent planning to issue contactless cards by the end of 2020.
Another 10 percent already issue some contactless debit cards. Only
20 percent of respondents said they have no plans to offer
contactless cards.
“Merchant acceptance of contactless cards has increased since
the introduction of mobile wallets a few years ago,” said Tony
Hayes, partner at Oliver Wyman and study principal. “Many issuers
also said they don’t want to risk being left behind when it comes
to contactless.”
Contactless cards are projected to represent as much as 60
percent of U.S. debit cards by the end of 2021 if financial
institutions replace their existing card bases at their expected
rates.
Focus on Digital Transformation
Enhancing digital capabilities is an important area of focus for
issuers. When asked about their digital strategies, issuers
reported offering, or planning to offer, an array of digital
services that fall into four categories:
- Providing effective, uninterrupted access to funds through
offerings such as self-service card replacement and issuance of
virtual cards into mobile wallets upon account opening.
- Driving debit use and wallet share through services such as
cardless ATMs, P2P payments and a listing of merchants with which a
cardholder has stored his or her card data.
- Enhancing customer engagement through services that include
self-service transaction disputes and card freezes.
- Increasing security and controls by providing real-time account
holder alerts and implementing multi-factor authentication for
online or mobile purchases.
Decline in Fraud Losses
For the third consecutive year, debit issuers’ average net fraud
loss per debit transaction declined, sinking to 1.1 cents from 1.3
cents in 2017. Issuers’ average net fraud loss per active card
declined to $3.24 per year in 2018 – about 10 percent less than in
2017.
Fraudsters are focusing on transactions initiated without a
physical card, which accounted for 69 percent of fraud claims but
only 24 percent of debit transactions in 2018. This compares to 66
percent of claims and 20 percent of transactions in 2017.
“Effective fraud mitigation requires a layered approach that
encompasses products, processes and people,” said McGuire. “We’re
working internally, and with others in the payments ecosystem, to
employ a range of solutions to help financial institutions identify
and block fraud on a broader range of debit transactions.”
Further study details are available here.
About the Study
The 2019 Debit Issuer Study is the 14th installment in the study
series, commissioned by PULSE and conducted by Oliver Wyman, an
independent management consulting firm. The study provides an
objective fact base on debit issuer performance and financial
institutions’ outlook for the debit business. Sixty-three
institutions – including large banks, credit unions and community
banks – participated in the study. The participants collectively
issue approximately 158 million debit cards and represent 44
percent of the U.S. debit market. 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
serves as a resource for debit education, research and knowledge
drawn from more than three decades of industry experience. For more
information, visit pulsenetwork.com. For insights into the latest
payments industry trends, visit Payments & You.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190801005099/en/
Anne Uwabor, 832-214-0234 PULSE anneuwabor@pulsenetwork.com
Dan Keeney, 832-467-2904 DPK Public Relations dan@dpkpr.com
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