Consumer Payment Preferences: Understand Choice
Announcing the 2005/2006 Study
of Consumer Payment Preferences
Debt Issuer Benchmarks
Upcoming Conferences
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As the array of payment options available to consumers proliferates, consumers' migration to electronic payment forms continues across all venues—with debit still leading the charge. In this issue of On Payments, we highlight key findings from our recently released 2005/2006 Study of Consumer Payment Preferences.
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Consumer Payment Preferences: Understand Choice
Cash or credit. Check or debit. Enter a PIN or sign a receipt. In a country that prizes freedom of choice, consumers’ ability to choose how, when, and where to pay for goods and services is at the heart of the U.S. payments system.
In the last 25 years, the range of choices consumers have for making payments has exploded. In 1979, consumers’ options were limited: in stores, consumers could choose to pay using cash, checks, or credit cards; bills were paid primarily by mailing a check. Today, consumers can still choose to pay using cash, checks, or credit cards—or they can choose to use one of an increasing array of electronic payment options.
The growth of payment choices has dramatically altered the payments landscape. Traditional paper-based payments continue to be important, but consumers are migrating to electronic payments across all payments venues. In the last 25 years, electronic payment methods’ share of non-cash payments has increased, from 15% in 1979 to 23% in 1995 to 42% in 2000—most recently reaching 55% in 2003.* And not only are consumers migrating from cash and checks to electronic payment methods, but the rate at which that change is occurring is accelerating.
Consumers are embracing new electronic payment methods, and are using them to make more and more purchases in stores and online and to pay their bills. Across each venue, electronic payments account for a significant—and increasing—share of the payments mix.
With the rate of change accelerating, it has never been more important to understand the drivers of consumers’ payment choice.
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Since 2001, Dove’s Study of Consumer Payment Preferences, conducted in partnership with the American Bankers Association, has documented the shift in consumer payment behavior across multiple payment venues. In 2001, paper-based payments represented 57% of consumers’ payments, with electronic transactions accounting for the other 43%. By 2003, a major milestone was reached, with electronic payments accounting for 51% of total consumer payments, surpassing paper payments for the first time. Between 2003 and 2005, the shift toward electronic payments continued, with paper payments decreasing to 45% of all in-store payments.
Although consumer adoption of electronic payments is increasing across the board, the speed of migration to electronic payments is not consistent across venues. The different migration patterns reflect fundamental differences in the dynamics of in-store payments, Internet payments, and bill payments.
And yet, across all three venues, debit is emerging as the clear winner.
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Debit is now tied with cash for the highest share of consumers’ in-store purchases, and 33% of consumers cite debit as the payment method they use most often in stores. Over the next two years, a net 14% and 13% of consumers plan to increase their use of PIN debit and signature debit, respectively. |
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Between 2003 and 2005, debit’s share of Internet purchases increased from 20% to 25%. Since 2001, consumers’ comfort with debit cards for Internet shopping has increased significantly. |
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An increasing number of consumers are using their debit card for bill payment (currently used by 9% of consumers). As more and more consumers earn rewards for using their debit cards, their use of debit for recurring bill payment is likely to increase (15% of debit cardholders with rewards use their debit card for bill payment). |
To read the full article, please click here.
Announcing the 2005/2006 Study of Consumer Payment Preferences
Dove is pleased to announce the release of its 2005/2006 Study of Consumer Payment Preferences, conducted in partnership with the American Bankers Association and sponsored by ACI, Citigroup, The Clearing House, and MasterCard.
The fourth in a series of consumer payment research studies, the 2005/2006 Study of Consumer Payment Preferences tracks the evolution of the U.S. payments landscape. An updated and expanded follow-on to the 1999, 2001, and 2003/2004 Studies of Consumer Payment Preferences, the 2005/2006 Study is the definitive guide to how consumers pay in different venues, and why and how their payment habits are likely to change in the future.
To read the Dove/ABA press release from October 25, please click here.
For more information, or to purchase the study, please call 1-800-BANKERS or visit www.aba.com.
Debit Issuer Benchmarks
Issuers, does your debit card portfolio measure up?
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57% of debit cards in the U.S. are active (when defined as one signature debit transaction within the past 30 days). |
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Active debit cards average 15.6 transactions per month (5.0 PIN and 10.6 signature). |
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36% of issuers now offer a debit rewards program to some or all of their cardholders; another 23% are considering offering one. |
This summer, on behalf of PULSE EFT Association, Dove conducted the Debit Card Fraud & Performance Benchmarking study. Based on interviews with 48 debit card issuers of varying sizes, geographic footprints, and network affiliations, representing 50MM debit cards, the study identifies best-in-class card performance standards and explores issuers’ growth strategies. The study also establishes factual metrics for signature debit and PIN debit fraud losses, and identifies tools and techniques to help issuers manage risk.
For more information, please click here.
Upcoming Conferences
BAI’s annual Retail Delivery Conference—the largest retail banking conference of the year—is next week. For the first time, the event will include a series of pre-conference forums designed to bring you leading-edge content across five areas of retail banking.
As part of the ATM forum on November 14, Tony Hayes will be presenting “The Future of ATMs” alongside Jonathan Velline, SVP of ATM Banking & Distribution Strategies at Wells Fargo (“Check Imaging and Wells Fargo’s Envelope Free ATM Program”) and Ben Psillas, President of Allpoint Network (“Surcharge-Free ATM Networks: How They Can Help Your FI Attract & Retain Customers”). Additionally, on Tuesday, Tony Hayes will moderate a panel discussion on “ATM Outsourcing: What is the True Impact on Profitability?” with Bryan Pisciotta of Citibank and Jim Braddock of UMB Financial Corp.
The total value of small cash transactions in the United States ($5 and under) is estimated to be $1.32 trillion annually. On December 6, more than 250 senior executives from global financial services firms, leading payments institutions, and brick-and-mortar, digital, and mobile retailers will gather in New York City to discuss the future of small ticket commerce at SourceMedia’s Third Annual Micro and Small Payments Conference, sponsored by Peppercoin.
Chris Allen will moderate a panel discussion on contactless payments, the latest in small value payments technology, with panelists including T.J. Sharkey, Vice President, Business Development, U.S. Acceptance for MasterCard International; Carl Stauffeneger, Senior Vice President, Product Management for KeyBank; and Julie Krueger, Vice President of Emerging Technology for JCB International.
On December 8-9, The Association for Work Process Improvement (TAWPI) is hosting Remittance Processing 2005 in Miami, FL. This conference explores best practices for managing remittance and imaging operations and new business models that allow organizations to improve operational efficiencies. On December 8, Ed Bachelder will be presenting a summary of the results from the TAWPI/Dove Consulting 2005 Remittance Processing Benchmarking Study. This session will provide corporate billers, banks and lockboxes with the opportunity to learn more about recent industry changes and how they are affecting remittance processing operations.