Mercator Blog

Debit and Alternative Products Advisory Service Update - September 2018
Date: September 4, 2018
Sarah Grotta
Director, Debit and Alternative Products Advisory Service

Don’t look now, but summer is nearly over, Labor Day is behind us, and fourth quarter is looming. It’s time to look at the list of 2018 objectives to assess what can still be accomplished this year. In case you were on vacation, the following is a list of recent reports released by Mercator Advisory Group’s Debit and Alternative Products Advisory Service in case you missed them. Also listed is research forthcoming soon:

Recent Reports Now Available:

 

Debit in Digital Channels

We released a Viewpoint document on debit cards and their use online, in app, and with mobile proximity wallets in retail store locations in The Intersection of Digital and Debit. Consumer survey data collected by Mercator suggests that U.S. consumers are getting more comfortable using debit in digital channels but still generally prefer to use credit cards. This document discusses the reasons for this preference and tactics that issuers might consider for encouraging more payments on debit cards. Included is a projection of U.S. e-commerce in total through all payment types.

 

Annual Debit Data Book

Mercator’s annual report on the U.S. debit card market was posted in July: 2018 Annual U.S. Debit Market Data Review. One interesting trend is the rise in the growth of debit card transactions and how very closely it mirrors the decline in the growth of credit card transactions. This really hits home on to need to have both products in customers’ wallets as changing economic factors favor one product versus the other. By being the provider of both credit card and debit card with a consumer, a financial institution is better able to neutralize the swings in payment type usage. This certainly helps to make the case for relationship rewards programs that offer rewards across a relationship for multiple product types. This report also tracks the U.S. debit market transactions, cards, prevailing trends and what may transpire next for the market.

 

Updated Faster Payments Report

In a report released in mid-August, U.S. Faster Payments Forecast, 2017–2021, Update: The Consequences of Faster Payments, we provide projections for P2P, B2C, C2B, and B2B faster payments out to 2021. These are updated slightly from our projections published in February of this year as we are tracking where the growth in faster payments is emerging most quickly. In this report we also take a look at the drive toward ubiquity of faster payments, which will be challenging in the decentralized, private industry approach that the U.S. market is taking.

Reports Coming Soon

Recurring Transactions
In September we will release a report regarding recurring payments and card-on-file transactions. Given an increase in online and mobile commerce, the growing market for subscriptions, and billers encouraging direct payments for regular bills, handling of these transaction for both issuers and merchants requires some attention. We take a look at the role of account updater and other best practices.

Interchange
Also forthcoming is a report on changes in interchange rates around the globe. Market forces and governments mandates are lowering interchange rates for merchants with ramifications for debit card profitability and checking account benefits. This report, scheduled to be released in the September-October timeframe, will look at trends and changes anticipated in the near term for interchange.

Around the Industry

Here are some recent industry reports and articles that may be of interest to you:

Overdraft Fees and Debit Cards
A bill was introduced in the U.S. Senate in August that will significantly reduce the number of overdraft transactions that can occur on a transaction account and the amount that can be charged when overdrafts are permitted. If bill is enacted, debit card transactions, including ATM withdrawals will not be allowed to create an overdraft even if the consumer has opted in for overdraft protection. I wrote about this for PaymentsJournal here. The actual language for Senate Bill 3343 - Stop Overdraft Profiteering Act of 2018 can be found here. Note that since this bill was only recently introduced, it is a long, long way from being enacted and quite possibly may never become law. We will continue to follow this legislation, however, and provide updates as they become known.

Contactless
A lot of buzz has kicked up about contactless card transactions recently. More stores are accepting contactless. Costco, for one, is now accepting its Citi Visa co-branded card and Apple Pay with Visa card credentials at its terminals. Visa recently released a report on the U.S. market for contactless found here. I am hearing that some of the largest issuers are considering selectively reissuing some credit card portfolios with contactless capabilities, but there is less interest at this time in investing in contactless for debit.

As always, if you have any comments regarding debit trends or wish to discuss anything in the realm of pay-now alternative products, I would enjoy hearing from you. Please feel to email or call:

Sarah Grotta
Director, Debit and Alternative Products Advisory Service
sgrotta@mercatoradvisorygroup.com
1-781- 419-1704