A Study on 2021 Debit Issuer: accelerated transformation to debit.

November 10, 2021

Commissioned by Discover Financial Services, the 2021 Debit Issuer Study shows that with the transformation of commerce, the Debit market has been making changes and evolving alongside it.

The COVID-19 pandemic affected the numbers shown in total Debit spending in the year 2020; US consumers reportedly made larger but fewer Debit purchases, a strong increase compared to previous years. 

The study also shows the different categories of suppliers, as merchants expanded their businesses in 2020. This includes digital retailers, home supply stores, and even travel and dining. 

According to Steve Sievert, Executive Vice President of Marketing and Brand Management with PULSE, trends that had been seen gaining momentum before the year 2020 showed a rapid acceleration after the COVID-19 pandemic.

The shift to digital commerce and card-not-present transactions, adoption of contactless and use of debit for money transfers all leaped forward at warp speed

According to the Debit Issuer Study, for the first time in 16 years, the number of transactions made by Debit card declined while the spending increased.

Debit transactions totalled 76.1 billion, compared to 78.1 billion in 2019 – a decline of 2.5% year-over-year. At the same time, total debit spending grew by 8% year-over-year, thanks to a significant jump in ticket sizes. Average ticket size rose from $40.50 in 2019 to $44.80 in 2020, an increase of more than 10%, the largest upswing in the study’s history. This boosted US debit volume to $3.4 trillion in 2020. When combined with prepaid debit volume of $240 billion, total debit spend eclipsed total spend on credit cards for the first time

Tony Hayes, Partner and Global Payments Team Lead with Oliver Wyman pointed out that even though the spending on outdoor dining and the fact that many retail locations closed their doors during the pandemic, people stocked up on groceries and basic necessities, resulting in less but larger Debit purchases in 2020.

The study also shows important spending shifts in American commerce, and while some retailers were left devastated by the pandemic, many others saw a boom in their profits, this includes book stores, digital goods and home-supply retailers. in contrast, transportation, restaurants and bars and fast food Debit spending declined dramatically.

The Diversification of Debit use

The study pointed out more use of debit in three additional areas, this includes contactless payments, mobile wallets and money transfers. 

Contactless debit card penetration nearly tripled in 2020- rising to 30% of all cards. Despite this growth, the percentage of contactless transactions represented only a small portion of purchases, only 1.6%

Mobile Wallets and money transfers saw a significant boom as well.

According to PaymentCardsandMobile, approximately 2 billion debit transactions were completed using the three major mobile wallets- Apple Pay, Samsung Pay and Google Pay. Money transfers or account to account (A2A) money transfers using Debit are seeing an increase as well.

(...) payments encompass peer-to-peer transfers, business-to-consumer transactions such as payments to gig-economy workers, and cardholders funding their digital-wallet accounts. A2A transactions per active debit card per month jumped nearly 60%, building on 100% growth in the prior year. The average active debit cardholder made about one monthly A2A debit transaction in 2020. Peer-to-peer solutions such as Venmo, Cash App and Zelle, are the main driver of A2A volume

The COVID-19 pandemic has had a huge impact on the market and use of Debit as we know it. It is evident businesses are having to make a shift with the times. As consumer demand shifts, so does the market around it.

Want to learn more? PaymentCardsandMobile’s full write-up here.

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