Debit cards have long been a top-of-wallet choice for consumers, but the pandemic has caused a shift in spending habits. With travel expenditures declining sharply during the pandemic, its use has shifted to more domestic purchases. This shift is likely to continue even as travel expenditures begin to rebound, as many consumers have become accustomed to the convenience and security for everyday purchases. Debit cards are also likely to benefit from the continued growth of contactless payments, which offer a convenient and hygienic way to pay for goods and services.
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Data for today’s episode is provided by Mercator Advisory Group’s report – Debit Card Abruptly Finds Itself Top of Wallet
4 Factors Correlate to the Debit Card’s Abrupt Rise to Top-of-Wallet:
- Even with only two quarters of data, trends point to a shift in consumer preference for debit vs. credit card.
- Four generally accepted principles have emerged following the COVID pandemic and debit transactions:
- 1) Consumer behavior has been drastically affected, both reduced and redirected to different spend categories.
- 2) Some changes, like travel spend, are likely to continue for two or three years. Others will be permanent.
- 3) Declining sectors will be partially offset by gaining sectors (i.e., grocery, digital services), while others are TBD (i.e., auto, gas, clothing).
- 4) The trend in total spend will be dependent on broader economic & employment factors, plus state and federal benefits programs.
- These factors correlate to a swift and noticeable shift toward spending consolidation with one card, a shift in payment channels, and growing comfort using debit rather than credit online.
About Report
In the continuing cycle of firsts and “unprecedented” events experienced during the global pandemic and the associated economic recession of 2020, the U.S. card market is currently experiencing a first of its own. Mastercard and Visa debit card transactions and dollar volumes are greater than those conducted on credit cards as explored in a new report, Debit Card Abruptly Finds Itself Top of Wallet. As consumers stare down potentially months of necessary household spending restrictions, they are relying on their debit cards much more, putting issuers in a new operating environment.
“We anticipate that changes in consumers’ payment habits, largely driven by the COVID-19 pandemic, are likely to continue long term, if not become permanent routines. While the credit card market is being challenged, debit cards are now at an advantage and debit issuers will want to take steps to insure they retain this position,” comments Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group and author of the report.