Debit has Overthrown Cash as King
According to a new report from BAI and Hitachi Consulting, entitled: 2008 Study of Consumer Payment Preferences, debit card usage has not only soared, it seems to have pulled a coup d’état.
PIN and SIG Debit has "overthrone" cash as the news preferred payment method by consumers.. It now constitutes a whopping 37% of consumers payments. Cash has fallen into second place at 29%. So it's official.
Cash is no longer king. PIN (Online) Debit is first... preferred 45% to 35% over SIG Debit which seems to reign far below in popularity, even in the face of banks and V/MC pushing it with their rewards based incentives. (20% have no preference)
When it comes to purchasing goods online, it's literally impossible to "sign" a debit card...therefore, in reality, signature debit doesn't even really exist when it comes to the making purchases on the web. (That's one emperor who most definitely wears no clothes) With the recent onslaught of fraud, the inherent weaknesses in the browser space, combined with a call to arm consumers with more secure payments, (along their preference for PIN debit), it won't be long before online debit for online shoppers becomes mainstream.
Speaking of mainstream...I don't know how HomeATM can even be considered an "alternative payment" method. There's nothing alternative about us...patented, yes. HomeATM was NEVER an alternative payment company. PIN Debit isn't an "alternative" payment. In fact, as this report shows, it's preferred! Hence, when it comes to securing transactions there's no alternative but to provide an end-to-end encrypted (E2EE) solution. So it looks like HomeATM, with it's patented E2EE PIN Debit solution for internet retailers...is also royally sitting pretty!
Here's the press release announcing the report. To read the report in PDF format, click here. 10 pages.
DALLAS--(BUSINESS WIRE)--Consumers’ use of cash is declining as they continue to embrace a range of card-based payment options, according to the 2008 Study of Consumer Payment Preferences, a nationwide study conducted by BAI Research and Hitachi Consulting, and sponsored by First Data, MasterCard Worldwide, Metavante, and PULSE.
Traditional card-based payment methods already have whittled away the base of check transactions in the United States, and are now impacting consumers’ use of cash, with 41 percent of consumers indicating they use cash less often today than they did two years ago.
“More and more consumers are substituting card-based payments in place of cash,” said Ajay Nagarkatte, managing director of BAI Research. “Of those who have reduced their cash use, 97 percent are shifting to credit, debit, or gift/prepaid cards instead.”
Credit CardsConsumers carry an average of four credit cards in their wallets. However, only 2.2 of those cards are used to make purchases in any given month, underscoring how competitive the credit card market has become. Study findings reflected the consolidation that has occurred in the credit card industry, with 75 percent of consumers’ Visa and MasterCard credit cards coming from 10 issuers.
According to the study, nearly half of all active cardholders revolve at least a portion of their total credit card balance each month. Although a slight majority of cardholders (54 percent) reported they pay all credit card balances in full, 46 percent carry a balance on one or more cards.
A significant driver of credit card use is rewards programs. More than 75 percent of cardholders report having rewards attached to at least one card. Overall, 58 percent of cards earn rewards. For 51 percent of rewards cardholders, rewards have a strong impact on their use of the card.
Debit Cards
PIN debit is preferred by 45 percent of consumers, while 35 percent prefer signature (20 percent have no preference). Those preferring PIN debit consider it more secure, faster, and easier to use than signature.
Consumers preferring signature debit do so for the security,(Editor's Note: What?), their inability to remember a PIN, (Editor's Note: Oh...) lack of fees, and, in some cases, rewards programs.
Gift/Prepaid Cards
Growth of gift/prepaid cards was not as robust as some analysts anticipated. Gift/prepaid cards accounted for only four percent of consumers’ in-store purchases, the same as in 2005. Study findings suggest, however, that the market for open-loop gift/prepaid cards is increasing. Retailer-specific cards continue to dominate the gift card space, but more than twice as many gift card purchasers/receivers bought or were given a general purpose gift card in 2008 as were in 2005.
About the Study
The 2008 Study of Consumer Payment Preferences is based on a nationally representative sample of 3,308 U.S. consumers in June 2008. For more information or to inquire about purchasing the study, contact Chris Allen, director, Payment Strategy Group, Hitachi Consulting, at 617-753-9250 or Ajay Nagarkatte, managing director, Syndicated Research, BAI, at 312-683-2486.
About BAI
BAI is the financial services industry’s partner for breakthrough information and intelligence needed to innovate and stay relevant in an evolving marketplace. For more than 80 years, we have focused on advancing the industry by offering unbiased education and research. Our offerings are as diverse as the industry, and include premier events such as BAI Retail Delivery Conference & Expo, ground-breaking research and performance metrics, professional learning and development programs, and in-depth editorial coverage through BAI Banking Strategies. Visit www.BAI.org for more information. BAI is Bank Administration Institute and BAI Center.
About Hitachi Consulting Corporation
As Hitachi, Ltd.'s (NYSE: HIT) global consulting company, with operations in the United States, Europe and Asia, Hitachi Consulting is a recognized leader in delivering proven business and IT strategies and solutions to Global 2000 companies across many industries. With a balanced view of strategy, people, process and technology, we work with companies to understand their unique business needs, and to develop and implement practical business strategies and technology solutions. From business strategy development through application deployment, our consultants are committed to helping clients quickly realize measurable business value and achieve sustainable ROI.
Hitachi Consulting's client base includes 25 percent of the Global 100 as well as many leading mid-market companies. We offer a client-focused, collaborative approach and transfer knowledge throughout each engagement. For more information, call 1.877.664.0010 or visit www.hitachiconsulting.com.
About the Sponsors
About First Data (www.firstdata.com)
First Data, owner of the STAR® network, is a global leader in electronic commerce. First Data powers the global economy by making it easy, fast and secure for people and businesses around the world to buy goods and services using virtually any form of payment. Serving millions of merchant locations and thousands of card issuers, First Data has the expertise and insights to help customers accelerate their business.
About MasterCard (www.mastercard.com)
MasterCard Worldwide advances global commerce by providing a critical economic link among financial institutions, businesses, cardholders and merchants worldwide. As a franchisor, processor and advisor, MasterCard develops and markets payment solutions, processes over 18 billion transactions each year, and provides industry-leading analysis and consulting services to financial institution customers and merchants. Through its family of brands, including MasterCard, Maestro® and Cirrus®, MasterCard serves consumers and businesses in more than 210 countries and territories.
About Metavante (www.metavante.com)
Metavante Technologies, Inc. (NYSE:MV) is the parent company of Metavante Corporation. Metavante Corporation delivers banking and payments technologies to over 8,000 services firms and businesses worldwide. Metavante products and services drive account processing for deposit, loan and trust systems, image-based and conventional check processing, electronic funds transfer, consumer healthcare payments, electronic presentment and payment, business transformation services, and payment network solutions including the NYCE Network, a leading ATM/PIN debit network. Metavante is headquartered in Milwaukee.
About PULSE (www.pulsenetwork.com)
PULSE is one of the nation’s leading ATM/debit networks, currently serving more than 4,500 banks, credit unions and savings institutions across the country. PULSE is owned by Discover Financial Services (NYSE: DFS). The network links cardholders with more than 289,000 ATMs, as well as POS terminals at retail locations nationwide. The company is also a valued resource for industry research related to electronic payments and is committed to providing its participants with education on evolving products, services and trends in the payments industry.
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