Security and Lack of Rewards Are Top Reasons That U.S. Consumers Do Not Use Debit Cards Online
Every year during the past five years, fewer consumers in the United States report using debit cards for purchases, particularly as consumers shift more of their spending toward electronic commerce (e-commerce) and mobile commerce (m-commerce). Although U.S. consumers still often prefer to pay with debit cards in stores for small items, groceries, or other everyday spending, 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 2018 Payments survey finds that 54% of survey respondents say they use debit cards for purchases, a figure that has declined steadily since its 5-year peak of 60% in 2014 and its 8-year peak of 68% in 2011, a reaction to the Durbin Amendment enacted in 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 and now also for bill payment and in-store purchases, especially among seniors and higher-income earners. Survey participants increasingly appreciate means to alleviate card security risk, primarily through mobile-based account controls, and young adults who used to be more inclined to use debit cards are especially interested in controls for debit more so than for credit. As consumers shift more of their spending toward online purchases and bill payments, they take advantage of a wider range of payment options, ranging from online payment services to digital person-to-person (P2P) payments and other alternative financial services (including prepaid cards) that may be starting to displace debit card use. Rather than use 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 2018 debit card user base continued to decline slightly although checking account ownership remains strong. Many consumers, especially young adults, 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. Consumers who lack the resources to avoid high debit card fees often seek alternative payment methods
to circumvent them. Such services, especially online services, are therefore appealing.
The Insight Summary Report, U.S. Consumers and Debit: Fewer Use It for Purchases, highlights opportunities for issuers to stimulate debit card usage and identifies potential disruptors to debit card use. Highlights include findings on debit card usage, 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.