Despite Recession, Card Issuers Expect Debit Growth in 2009
2009 Debit Issuer Study, commissioned by PULSE, reveals greater PIN debit use and lower fraud losses
HOUSTON, TX, Jun 4 – 2009 — The 2009 Debit Issuer Study, commissioned by PULSE, identified several positive trends for financial institution debit card issuers, including sustained debit transaction growth despite the recession. This edition of the comprehensive debit card industry study also found that use of PIN debit has increased, while fraud loss rates have declined.
Issuers surveyed experienced debit transaction growth of 8 percent in the second half of 2008, composed of 15 percent growth in PIN debit transactions and 4 percent growth in signature debit. Survey participants predicted 7 percent growth each for PIN and signature debit in 2009.
"Although the economy is a challenge for debit card issuers, as it is for everyone, debit transaction growth remains strong," said Cindy Ballard, PULSE executive vice president. "Debit card use is expected to continue to grow as the economy bottoms out and begins to recover, because consumers use their debit cards for a large portion of necessary everyday expenses."
The 2009 Debit Issuer Study revealed that more than a quarter of all debit transactions (27 percent) in 2008 were for less than $10.
"In most cases, these transactions are replacing cash, highlighting a clear consumer preference for electronic payments," said Ballard.
Debit card penetration – the percentage of eligible account holders who have a debit card – remained flat at 73 percent. Using an expanded definition of "active" debit cards, the number of issued cards used actively in 2008 was 66 percent.1
PIN debit accounted for 35 percent of debit transactions in 2008, up slightly from 34.2 percent in 2007. The average debit transaction value was $42 for PIN debit and $37 for signature. Both figures have declined by roughly $1 compared to the previous study. In addition, active debit cardholders performed 17.3 point-of-sale transactions per month, on average, compared to 16.6 transactions per month in the 2008 survey.
Debit card fraud losses at the point of use declined in all categories. PIN point-of-sale losses, as measured in dollars per card per year, fell to $0.15 from $0.19. Similarly, ATM losses declined to $0.56 per card per year from $0.61, and signature debit loss rates fell to $1.81 from $1.92. Although losses at all three usage points declined year-over-year, the survey did record an increase in share for ATM losses, to 38 percent of total debit fraud losses in 2008 from 25 percent in 2007.
Additional survey findings include:
- Active debit cardholders performed 3 ATM transactions per month, on average, down from 3.4 in the previous survey.
- More than half of issuers surveyed (53 percent) participate in a surcharge-free ATM network, down slightly from 56 percent in 2007. And 43 percent offer ATM surcharge reimbursements to at least some cardholders.
- Bill payments represented 10 percent of signature debit transactions in 2008, compared to 7 percent in 2007.
- The percentage of debit card issuers offering debit rewards programs continues to grow, rising two percentage points to reach 53 percent this year.
- Thirty-seven percent of issuers offer mobile banking, compared to 15 percent in 2008, while 38 percent plan to introduce it soon, up from 28 percent last year.
"The 2009 study uncovered several reasons for optimism among financial institutions that issue debit cards," noted Tony Hayes, an Oliver Wyman partner, who served as project lead on the study. "Among them, debit card-based bill payments account for a small but rapidly growing share of debit card payments, a market with significant potential for growth in the coming years."
The 2009 Debit Issuer Study results support PULSE's view that debit cards still have considerable long-term growth potential.
"Despite the challenge of navigating through an economic downturn, debit card issuers have much to be encouraged about," said Ballard. "Transaction growth remains robust, and issuers see further improvements in the performance of debit card portfolios as a key opportunity in 2009."
About the Study
The 2009 Debit Issuer Study is the fourth installment in the study series. The series provides an objective fact base on debit card issuer performance and financial institutions' outlook for the debit card business. Seventy-three financial institutions – including large banks, credit unions and community banks – participated in the 2009 study, which was conducted by Oliver Wyman. Collectively, the participants issue 94 million debit cards and operate 61,000 ATMs. The sample is representative of the U.S. debit market in terms of institution type, location and debit network participation.
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. For more information, visit www.pulsenetwork.com.
1In previous Debit Issuer Studies, the most common definition of "active" cards was those used to make any signature transaction in the last 30 days. By this measure, 56 percent of debit cards were active in 2008, a slight decline from 2007. An equal number of issuers now define active cards as those used to conduct any transaction in the last 30 days, resulting in the higher 66 percent card activation rate.