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 and author of the report.
Highlights of the report include:
- Review of Mastercard and Visa debit and credit data for the U.S., that finds purchase volumes in total were down 7% in Q2 2020 over Q2 2019. The decline was attributable solely to the 21.2% decline in credit purchase volume, compared with debit’s 8.6% increase.
- Analysis of data compiled over the last several years showing that debit card and credit card growth often reflect opposite trends. Recent data reveal a very stark reaction to the two primary card products. In just the space of two quarters (Q4 2019 to Q2 2020), debit cards went from a 46.4% share of purchase volume to 55.3% share.
- Survey data finds the use of a single preferred payment method has been increasing since 2018, with cardholders concentrating their payment loyalty to either credit or debit and a declining number choosing to use multiple payment options.
- Activities that debit issuers will want to consider to hold on to loyal debit card users for the long term.
1. Executive Summary
3. Big Shifts in U.S. Card Volumes Favor Debit
4. Consumer Attitudes Were Already Trending Toward Debit
- Pre-Pandemic Shifts
- Consumers are favoring a single card
- Post-Pandemic Shifts
5. Conclusion: Holding on to the Top-of-Wallet Position for Debit
- Related Research
Figures and Tables
Figure 1: Combined credit and debit card transaction volumes in Q2 2020 are down 12% over Q2 2019
Figure 2: Combined purchase volume is down about 7% YOY in Q2 2020 driven by declining credit cards; debit now leads
Figure 3: Average ticket continues to grow, up markedly for debit as "daily spend" categories remain strong
Figure 4: Debit cards and credit cards have typically shown opposing growth rates
Figure 5: Half of consumers say they are reducing credit card use, a new high since the end of the Great Recession
Figure 6: Those consumers decreasing their use of credit cards are most likely to use debit
Figure 7: Consumers have been consolidating their use of favored cards since 2018
Figure 8: Charge and GPR prepaid users are more likely to cite increased use due to the pandemic
Figure 9: Use of contactless transaction technologies has increased, compared with contact chip cards