TECHNOLOGY

Study: Consumers love this payment method

BY Dan Berthiaume

Digital and mobile commerce are driving growth in one type of payment.

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, according to 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% 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.

As a result of shifting payment patterns, study results indicate 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% increase year-over-year.

The percentage of debit issuers that say they are interested in offering contactless cards nearly doubled year-over-year, with 70% planning to issue contactless cards by the end of 2020. Another 10% already issue some contactless debit cards. Only 20% of respondents said they have no plans to offer contactless cards. Contactless cards are projected to represent as much as 60% of U.S. debit cards by the end of 2021 if financial institutions replace their existing card bases at their expected rates.

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% less than in 2017.

Study results indicate fraudsters are focusing on transactions initiated without a physical card, which accounted for 69% of fraud claims but only 24% of debit transactions in 2018. This compares to 66% of claims and 20% of transactions in 2017.

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.

Study participants collectively issue approximately 158 million debit cards and represent 44% of the U.S. debit market.

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