Star Survey: Consumers Prefer PIN, While PIN Fees Are Less Frequent

Consumers generally prefer PIN-based debit to signature debit, and are less frequently subjected by banks and merchants to fees for PIN-debit usage, according to a recent survey. At the same time, the number of banks offering rewards incentives to consumers for PIN-debit usage, already a small minority, is declining, says the Consumer Payments Usage Study, conducted at the end of 2004 and sponsored by First Data Corp. and its Star Networks Inc. electronic funds transfer network. Forty-seven percent of respondents in the survey reported preferring PIN debit to signature debit, while 30% opted for signature over PIN. While this shows a healthy margin for PIN debit, in which cardholders enter personal identification numbers to authenticate the transaction rather than sign a receipt, the number is down slightly from the 51% showing a preference for PIN debit in 2000. The survey, which Star has conducted annually since 1992, expanded in 2004 to include a geographic region, New England, whose population wasn't included in the previous studies. Excluding New England, PIN preference in the 2004 survey was 48%. At the same time, consumers are apparently less often receiving rewards benefits for using PIN debit. Some 18% reported they were offered a rewards program, or 19% excluding New England. The comparable number in 2002 was 30%. Such marketing tactics are more common for signature-based debit, which is sponsored by Visa U.S.A. and MasterCard International. Twenty-five percent received rewards offers for signature debit, virtually unchanged from previous years. Reports of fees assessed by both banks and merchants for PIN debit usage are declining. Only 10% said they incurred such a fee from a financial institution, down from 14% in 2000. At the same time, 14% said they had been charged by a retailer or restaurant for a debit transaction, with no distinction reported between PIN and signature. The study does not address whether consumers are accurately distinguishing between bank fees and merchant fees, as merchants have complained in recent years that customers blame them for PIN-debit fees actually levied by their banks. By contrast, 3% said they had been charged by their banks for signature-debit usage, down from 8% in 2000. A Federal Reserve study released last year found that 15% of consumers were subject to bank-assessed PIN debit fees, and that 14% of banks were charging the fees (Digital Transactions News, Nov. 24, 2004). In the FDC survey, the average PIN-debit fee reported was $1.20, or 11 cents higher than the average reported signature-debit charge. The survey, conducted by Applied Management & Planning Group, canvassed almost 13,000 consumers in 35 states. Its error rate is plus or minus 1% at the 95% confidence level.