Mercator Blog

Nearly 3 in 5 U.S. Consumers and 4 in 5 Young Adults Use Person-to-Person Payment Services
Date: January 22, 2018
Karen Augustine
Manager, Primary Data Services
Debit card use in the United States continues to be shaken by a number of factors that may inhibit use, particularly as consumers shift toward electronic commerce (e-commerce) and mobile commerce (m-commerce) for their convenience. Although U.S. consumers still often prefer to pay with debit cards in stores, household use of debit cards continues to slip slightly each year according to the annual Payments survey in Mercator Advisory Group’s CustomerMonitor Survey Series. The 2017 Payments survey finds that 57% of survey respondents say they use debit cards, a figure that has declined slightly, particularly since the Durbin Amendment was enacted in late 2010.

Security concerns appear to hinder debit card use online and are the top reason for not using debit cards online among consumers who do not use debit for this purpose. Also, fewer rewards are offered for debit cards, while issuers appear to be improving incentives for credit cards and facilitating their use online and by mobile. The shift to online spending may be inhibiting debit card use. More U.S. consumers prefer using credit cards than debit cards for online purchases although not for bill payment or in-store purchases. Survey participants increasingly appreciate means to alleviate card security risk, for example through use of EMV chip cards and enhanced security measures as long as they are not burdensome or intrusive. EMV cards prevent counterfeit card fraud at the point of sale, but they do not enhance security for online transactions. Yet consumers are shifting more purchases and bill payments online and to mobile phone or tablet, taking advantage of a wider range of payment options, ranging from online payment services to digital person-to-person payments and other alternative financial services that may be starting to displace debit card use. Rather than using their debit cards, they can hold funds in these alternative payment sources, which are easily accessible by mobile device.

Unlike making purchases on credit, using debit cards supports the cardholder’s budgeting and imposes limits on spending the account balance. In 2017 debit card use continued to decline slightly. Many consumers report paying some type of fee for the use of checking accounts and debit cards, primarily monthly fees on their accounts and even individual fees charged to transactions on their checking accounts, though fewer respondents to the 2017 survey report doing so, perhaps having found ways to avoid these fees. Consumers who lack the resources to avoid high debit card fees often seek alternative payment methods to circumvent them. Alternative payment services, especially online services, are therefore appealing.

The report, U.S. Consumers and Debit: Shift to Online May Inhibit Use, highlights opportunities for issuers to stimulate debit card usage and identifies potential disruptors to debit card use. Highlights include findings on debit card users and activation, the ways debit cards are used, the availability of debit card rewards, and consumer use of cash, alternative financial services, and online payment services by platform compared to other methods in the United States. The report analyzes the survey results to understand U.S. consumers’ use of debit cards, their card preferences for online purchases by type of purchase, their reasons for not using debit card, the types of fees they pay for the use of checking, and the card features offered to them.