HOUSTON (6/15/10)--The debit card market--robust during the second year of the economic downturn--is expected to grow strongly in 2010, according to the 2010 Debit Issuer Study commissioned by PULSE. Much of the growth is in small-ticket transactions, suggesting consumers prefer debit over cash. Card issuers surveyed saw overall debit transaction growth of 10% between 2008 and 2009, with 58% of debit transactions in 2009 at less than $20 (Business Wire
June 14). "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." Personal identification number (PIN) debit transactions outpaced signature debit transactions, said the study. PIN debit grew by 13% from 2008 to 2009, with an average ticket size of $41. Signature debit transactions rose 9% with an average $35 ticket. Both ticket figures are a decline by $1-$2 from PULSE's previous study. Other findings:
* Active debit cardholders, with at least one PIN or signature point-of-sale (POS) transaction in the past 30 days, conducted an average 17.3 transactions per month--steady with the 2008 transactions. * Debit card penetration--the percentage of eligible accounts that can be accessed by debit card--remained steady at 73% since 2007. Sixty-four percent of consumer debit cards are active, compared with 66% in 2008.
The increase in transactions has prompted more concern among card issuers about how fraud and government regulation might impact profitability of debit cards. Last year, 95% of debit card issuers were hit by data breaches, making fraud mitigation a top challenge, said PULSE. Issuers' average signature POS fraud losses rose 43% last year, from 5.2 basis points (bps) to 7.5 bps. And PIN POS fraud losses increased 24% to one bp from 0.8 bp. Issuers surveyed cited government regulations as a major challenge for their institutions. Changes to Regulation E taking effect this summer will require opt-in consent before consumers can incur overdraft charges. Those surveyed expect 30% of consumers to opt- in to overdraft services, but expectations vary according to institution size. Large banks expect 20% to 40% of customers to opt in. Many credit unions and community banks surveyed expect a much higher opt in rate--of more than 70%. Interchange and overdrafts produced about $118 of annual revenue per active card in 2009, but financial institutions said the Reg E changes will result in fewer approved transactions, lower interchange income and less profitable debit card programs, impacting debit card profitability over the next two years. The survey indicated that 45% of issuers surveyed already have created a plan to respond to the changes. PULSE is an ATM/debit network that serves more than 4,400 banks, credit unions and savings institutions across the U.S.