Debit Usage Is Rising — Here’s What It Means for Merchants
Shoppers everywhere are being more careful. With concerns about their finances and a desire to control expenses, consumers are increasingly choosing payment methods that offer convenience and real-time spend visibility.
As a result, consumers in-store are choosing to use their debit cards more often. With contactless features, these payment cards can avoid the health risk of cash while also giving consumers financial control. But debit use is also increasing online—where people are shopping more and more often.
Consumers of all ages, from all over, want to pay with their debit cards. And when they can’t, they take their business elsewhere. As a result, merchants who don’t accept all debit card brands risk losing revenue not just in the short-term, but in the form of missed lifetime opportunities.
Debit Increases in All Demographics
Even before the onset of the pandemic last year, consumers increasingly wanted greater control over their finances. According to a 2020 survey conducted by 451 Research, there was a net increase in debit usage of 27 percentage points over the previous year—nearly double the gain seen in 2018.1 And debit sales volumes reflected this increase, growing by over $465 million, or over 20 percent, from 2019-2020.2
This trend is found throughout all demographics, but it’s especially popular with younger adults (age 18-24 years), of whom 96 percent use debit, the survey found.1 And it’s become the No. 1 preference nationally for both everyday transactions and those in the $25- $100 range. In fact, 46 percent of survey respondents said they prefer to use debit for this size transaction.3
That’s an increase of 3 percentage points over the 2018 results. What’s more, even for purchases over $100, debit rose 12 percentage points from 2018.1 No wonder restaurants, telecommunications, retail, and fuel are among just some of the industries at the top of the list of merchant categories with the highest debit spend.4
The Trend Accelerates Amid Safety Concerns
For merchants, debit isn’t just a payment option—it’s now a customer experience factor. In-store, debit is not only more convenient as a contactless payment, but is more sanitary than paper currency. This increased focus on hygiene and safety protocols during the pandemic was seen as a primary factor helping fuel debit’s popularity.
The results of the 451 study support this idea, according to Jordan McKee, the research firm’s Principal Research Analyst for Customer Experience & Commerce. Approximately one in six consumers made their first-ever contactless purchase last year, and nearly nine in 10 of those first-time contactless payment users plan to continue using contactless payments.5
As a result, contactless payments are up, and cash and checks are down. In fact, 37 percent of survey respondents said they’re using cash less often, while 31 percent indicated they’re using checks less often compared to the year prior.6 Even in rural areas, where cash is more popular than in metropolitan or suburban regions, the preference for debit is double that of cash.6
The Importance of Broad Acceptance
Consumers’ preference for this payment method has made the question of availability increasingly important as the issuance of debit cards by financial institutions varies widely based on geography. Many rural consumers are customers of regional or community banks, for example, and might not have access to a full range of debit options. So, for merchants, accepting just one type of debit card isn’t enough. To avoid a negative experience at checkout and reach all potential customers, merchants need to accept all card brands.
What happens when they don’t? Customers expect a seamless payment experience, so non-acceptance can be damaging now and in the future. Studies have shown that non-acceptance of debit can result in a potential loss of sales.
This was confirmed in the most recent 451 survey: 54 percent of customers who couldn’t pay with their debit card either spent less at that merchant or left the business and made their purchase elsewhere. And more than a third (35 percent) of consumers blamed the merchant—not card networks, issuers, or payment processors—for not accepting debit cards at checkout.6
A Billion-Dollar Opportunity
Recent increases in debit usage aren’t unique to the pandemic era. A similar thing happened during the Great Recession that started in 2007. When the economy looks uncertain, people respond by paying closer attention to their finances and seeking greater control.
But debit’s ease of use for contactless and online payments, along with improved financial literacy of younger generations, mean today’s trend is very likely here to stay.
Debit cardholders already account for billions of dollars in sales volume,7 and that number is increasing at a rapid rate. Merchants who are paying attention are making it as easy as possible for their customers to pay with debit.
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1 451 Research, November 2020. Debit Cards Drive Commerce: 2020 Edition. Merchant and Consumer Insights on Debit Card Usage and Acceptance. Viewed 16th March 2021.
2 DFS Internal GNA Data, September 2020.
3Gen Z Goes Shopping: How the Primacy of Payment is Shaping the Future of Commerce, Survey conducted by The Center for Generational Kinetics, 2019, in partnership with Discover® Global Network. Viewed 12th May 2021.
4 DFS Internal GNA Data, November 2020.
5 451 Research, January 2021. Webinar: Debit Cards Drive Commerce: Merchant and Consumer Insights on Debit Card Usage and Acceptance. Viewed 16th March 2021.
6 451 Research, November 2020. Debit Cards Drive Commerce: 2020 Edition. Merchant and Consumer Insights on Debit Card Usage and Acceptance. Viewed 16th March 2021.
7 DFS Internal GNA Data, September 2020.
The information provided herein is sponsored by Discover® Global Network. It is intended for informational purposes, and is not intended as a substitute for professional advice.