Debit Card Use Remains Robust in Midst of Economic Downturn

2010 Debit Issuer Study, commissioned by PULSE, finds consumers increasingly prefer debit over cash

HOUSTON, TX – Jun 14, 2010 — The 2010 Debit Issuer Study, commissioned by PULSE, reveals that the debit market remained robust during the second year of the economic downturn and is projected to grow strongly in 2010. The study finds that much of the growth in debit use is in small-ticket transactions, suggesting that more consumers prefer debit over cash.

Issuers surveyed experienced overall debit transaction growth of 10 percent between 2008 and 2009. Much of this growth was with small-ticket transactions. In 2009, 58 percent of all debit transactions were less than $20.

"The debit market has continued to weather the economic storm as a result of consumer preference for debit and increasing merchant acceptance of small-ticket debit transactions," said Cindy Ballard, PULSE executive vice president. "As consumers scaled back spending during the recession, they embraced a pay-as-you-go approach and are keeping their debit card top of wallet."

Furthermore, the study found that year-over-year PIN debit transaction growth outpaced that of signature debit transactions. Between 2008 and 2009, the use of PIN debit grew by 13 percent with an average ticket size of $41; signature debit transactions increased by nine percent with an average ticket of $35. Both figures for average ticket have declined by roughly $1 to $2 compared to the previous study. In addition, active debit cardholders, those who conducted at least one PIN or signature POS transaction within the last 30 days, performed on average 17.3 POS transactions per month, also flat compared to 2009.

The 2010 Debit Issuer Study found that debit card penetration – the percentage of eligible accounts that can be accessed by a debit card – has remained steady at 73 percent since 2007. Sixty-four percent of consumer debit cards are active, largely unchanged from 66 percent in 2008.

"As evidenced by the performance of best-in-class issuers who have managed to significantly outperform the market, there is clearly an opportunity to enhance the debit experience with existing customers and create interest with potential customers," said Ballard. "Increased interest from debit card issuers to explore programs such as instant card issuance will continue to promote further growth in the debit industry."

As debit card transactions continue to increase, issuers are becoming more concerned about how fraud and government regulation could impact profitability. In 2009, 95 percent of debit card issuers were affected by data breaches, making fraud mitigation a top challenge for issuers. Issuers' average signature POS fraud losses increased 43 percent last year from 5.2 basis points (bps) to 7.5 bps, and PIN POS fraud losses rose by 24 percent from 0.8 bps to 1.0 bps.

"Despite the uptick in fraud, growth in the debit market remains solid, and the 2010 study identified specific areas of opportunity for sustaining momentum, such as business debit and rewards programs that are more integrated with checking accounts," said Tony Hayes, an Oliver Wyman partner, who served as project lead on the study. "The debit market has shown resiliency despite the economic challenges, as consumers turn to readily available funds over other payment methods."

Regulation E Changes

Government regulations were cited by issuers as a major challenge for their institutions. Changes to Regulation E (Reg E), which will take effect this summer, will require opt-in consent before consumers can incur overdraft charges. Overall, issuers expect 30 percent of consumers to opt in to overdraft services, but expectations vary according to institution size. Large banks expect 20 to 40 percent of their customers to opt in, while many credit unions and community banks expect a much higher participation rate, with many forecasting that more than 70 percent of customers will opt in.

With interchange and overdrafts producing approximately $118 of annual revenue per active card, financial institutions expect that the changes to Reg E will result in fewer approved transactions, lower interchange income and less profitable debit card programs, impacting debit card profitability over the next two years. In an effort to counteract potential decreased fee income, 45 percent of issuers have already created a plan in response to the changes.

About the Study

The 2010 Debit Issuer Study is the fifth 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. Sixty-four financial institutions – including large banks, credit unions and community banks – participated in the 2010 study, which was conducted by Oliver Wyman. Collectively, the participants issue 78.7 million debit cards and operate 42,063 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


Steve Sievert
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Tara Hanney