Evolution in Consumer Payments Behavior: How the Durbin Amendment and the Economy Are Driving Payments Change
Javelin Strategy & Research, December 2011, Pages: 29
Changes in the regulatory and economic environments have transformed market incentives influencing the use of various payments options and have limited traditional avenues of revenue associated with payments options. Debit card issuers alone stand to lose a combined total of $12.2 billion beginning in 2012 due to recent debit card regulations and, as a result, they are highly motivated to influence consumer payments choice. But consumer expectations surrounding checking accounts, debit cards, and credit cards have also changed as consumers have grown accustomed to free checking and free use of debit cards. This report evaluates the recent changes in the payments market, analyzes consumer expectations of payments products, and provides recommendations on successfully navigating the changing payments environment.
Primary Questions
- How have recent changes in the regulatory and economic environments altered consumer payments preferences?
- Which payments options are most consumers using?
- What expectations do consumers hold in light of recent financial regulations?
- How has the recession influenced payments behavior, and how will the economy continue to drive new forms of payments?
- What are the key effects of payments change for FIs, merchants, and consumers?
- What action steps will help organizations meet consumer expectations while driving desired payments service usage?
Methodology
This report is based on a survey using data collected online by Javelin in October 2011 from a random-sample panel of 3,210 U.S. adult consumers. The survey targeted respondents based on representative proportions of gender, age, and income compared to the overall U.S. online population. According to the U.S. Bureau of the Census, the 2011 U.S. population comprises approximately 312 million people. The overall margin of sampling error is ±1.73 percentage points at the 95% confidence level.
Overview
Primary Questions
Methodology
Executive Summary
Changing Market Dynamics
The Durbin Amendment’s Influence on Change in the Payments Mix
Banks and Networks
Merchants
The Recession’s Influence on Payments Behavior
Effects of Payments Change
Action Steps
Appendix
Related Research
Companies Mentioned
Table of Figures
Figure 1: Percent of Consumers Who Have Used a Particular Payments Product in the Past 12 Months
Figure 2: Payments Option That Most Consumers Would Likely Switch to Due to Debit Card Fee, by Generation
Figure 3: Level of Satisfaction With Various Debit Card Features
Figure 4: Consumer Expectations About Which Parties Will Benefit From the Durbin Amendment
Figure 5: Interchange Cost for Low- and High-Dollar Transactions, Pre- and Post-Durbin
Figure 6: Required Discount to Persuade Consumers to Switch Payments Choice
Figure 7: Noncredit Payments Option That Most Consumers Would Likely Switch to Based on Merchant Discounts, by Generation
Figure 8: Expectations About Merchant Price Reductions Resulting From Interchange Regulations, by Generation
Figure 9: Percent of Consumers Who Have Experienced a Change in Their Ability to Pay Off Credit Card Debt, 2008 and 2010–2011
Figure 10: Most Frequently Used Payments Methods, by High Net Worth, Underbanked, Generational, and All Consumers
Figure 11: Mean Fraud and Consumer Costs for Debit and Credit Cards, 2010
Figure 12: Community Bank Mailer Promoting Free Debit Cards
Figure 13: Percent of Consumers Who Have Specific Account or Payments Products
Figure 14: Top 10 FIs Eliminating Free Checking, by Deposits
Figure 15: Percent of Consumers Who Have Heard About Recent Debit-Card Regulations, by Generation
- 7-Eleven
- McDonald’s
- American Express
- PNC
- Bank of America
- Regions
- Bank of New York Mellon
- SunTrust
- Camden National Bank
- TD Bank
- Capital One
- U.S. Bank
- Chase
- USA Technologies
- Citibank
- Visa
- Dairy Queen
- Walmart
- Discover
- Wells Fargo
- MasterCard
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