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How Will Issuers Keep Debit Top of Wallet?

PaymentsJournal by PaymentsJournal
October 2, 2020
in Debit, Truth In Data
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Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left corner of your screen to receive notifications as soon as the episode publishes.

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.

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.

Tags: Consumer SpendingCredit CardsDebitDebit CardsDebit RewardsissuersTruth In Data
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