The fourth and latest installment of the Debit Issuer Study shows an increase in overall debit transactions in 2008, as well as an increase in PIN debit transactions and a decrease in fraud loss rates. The 2009 study was commissioned by Discover Financial Services' Pulse network and conducted by Oliver Wyman Group.
The research revealed overall debit transaction growth of 8 percent in the second half of 2008. The greatest increase was seen in PIN debit: 15 percent, as opposed to 4 percent for signature debit. Issuers participating in the survey projected 7 percent growth in both PIN and signature debit in 2009.
"Americans are turning toward PIN-based debit, and they've been forced to do so by the retailers," said Steve Eazell, Director, National Sales and Marketing at Secure Payment Systems Inc. He added that consumers don't care which type of debit they use "because they think the money's coming out of the accounts instantaneously anyway."
The study, which surveyed 73 financial institutions of varying sizes, also showed that 27 percent of all 2008 debit transactions were under $10. Cindy Ballard, Pulse Executive Vice President, stated, "In most cases these transactions are replacing cash, highlighting a clear consumer preference for electronic payments." The study also revealed the following data for 2008 (compared with the previous year):
Regarding the increase in debit rewards, Mark Landis, President of Metro Merchant Services, said his bank was encouraging its customers to use signature debit because the bank "makes more interchange on a signed off-line debit than a PIN online debit.
"The interchange is much greater and that's how [the banks] can pay the rewards for the check card," Landis said. "They can't pull rewards out of a PIN transaction. There's not much money there. We just went through an increase [on PIN debit] but there's still less money for the issuers on PIN debit transactions."
Eazell said, "I think that [issuers are] going to figure out ways that they can utilize that. It's a less expensive transaction, so everybody benefits really. Issuers want to incent them. ... I think you're going to see more incentives in that particular area. I think that rewards cards are effective. It's a different type of rewards program, though. There's not enough revenue in it for the issuers to be able to offer the same level of rewards that they could with the credit cards."
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