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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
How Will Issuers Keep Debit Top of Wallet?
- Debit cards have taken a slight lead over credit cards as consumers’ preferred top-of-wallet card.
- Credit card profitability is down: declining outstandings, changing spending patterns, loss provisioning, erosion in the power of rewards, and a deep recessionary environment.
- For Card Issuers: Debit cards have low, regulated interchange on the global networks and a market-imposed ban on other card related fees.
- One Card For All Channels: Promote debit inclusion in mobile wallets, P2P, retail wallets, and apps.
- Simple Savings and Budgeting Apps: Promote savings and budgeting apps and functionality.
- Excellence in Managing Unauthorized Transactions: Promote debit use for card-not-present channels, where credit retains a foothold.
- Consideration of Debit Rewards: While debit profitability does not support credit level rewards, a well-executed rewards program may help to retain former credit card users.
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.