Wednesday, June 5, 2024
"The debit card is the most popular payment method at the point of sale, and now we're seeing debit moving into digital wallets," said Sean Gelles, director of payments intelligence at J.D. Power.
J.D. Power's 2024 debit card satisfaction study found that overall, 72 percent of consumers use a debit card at the POS, either by tapping, dipping or swiping their card in person, or by entering their account numbers online or in a mobile app. That's more than all other payment methods, including cash, credit cards and digital wallets. Debit cards also had the highest proportion of customers (68 percent) with a favorable impression of the payment method when compared with other forms of payment, such as credit cards and buy now, pay later.
The primary concern keeping debit from top-of-wallet status with those who don't favor the payment method is uneasiness over security. "Thirty-four percent of consumers who do not use debit say concern about security is the reason why," Gelles said. "Digital wallets solve that problem."
Unlike plastic cards, digital wallet apps require additional layers of security, such as pass phrases, facial recognition and thumbprint technology. If someone loses a smartphone containing a digital wallet, it would be nearly impossible for someone else to access that wallet without mimicking the owner's thumbprint, for example. "Consumers are very aware of the security of digital wallets," Gelles noted.
Security is "critically important to debit card users," J.D. Power stated in a review of its report. Card issuers that keep customers well-informed about security policies and protections receive the highest marks from consumers. BMO, Capital One and Huntington Bank all rank high with consumers due to their focus on security, the company reported.
Credit cards enjoyed top of wallet status with consumers for many years, but that changed during the pandemic. A 2022 study by S&P Global Market Intelligence found 56.2 percent of consumers identified a debit card as their primary payment card, compared with 39.5 percent for credit. Just one year prior, only 40.2 percent of consumers said they preferred to use debit cards.
Gelles believes debit cards will continue to enjoy top of wallet status, especially with cost-conscious consumers. Among the consumers J.D. Power surveyed, 28 percent pointed to cost (interest rates) and 25 percent said they were averse to building up debt as reasons for not using credit cards.
About the only thing that would change consumers' minds, Gelles suggested, would be a no-fee credit card that also included rewards. "That's the only scenario where I could see debit cards getting displaced," he said.
The big risk to debit card issuers is that their cards could become associated with the wallet provider (for example, Apple) rather than the bank issuer. "After all, when a customer uses a digital wallet, the ease of use and positive connotations they feel is attributed to the technology company behind the wallet, not the debit card," J.D. Power wrote. "Issuers will have to find new ways to make experiences related to budgeting, security, or rewards, all of which have strong influence on debit card user satisfaction when delivered well."
Paze, a digital wallet created by Early Warning Services LLC, a technology company owned by seven of the nation's largest banks, could help by enabling participating debit card issuers to retain brand relevance and the customer relationship, J.D. Power suggested.
The J.D. Power report was based on its 2024 debit card satisfaction study, fielded from September through November 2023 and included responses from 7,756 consumers. 
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