POS Debit Card Usage Continues To Grow, Star Survey Says

Debit cards continue to find favor with consumers for point-of-sale purchases, results of the latest annual payments survey by First Data Corp.'s Star electronic funds transfer network shows. And recent security breaches involving PIN-based debit cards don't yet seem to have dented PIN debit's popularity. According to Star's 2005/2006 Consumer Payments Usage Study, POS debit usage is up by 40% since 2001, with active cardholders using their cards on average for slightly more than 11 transactions per month compared with an average of slightly under 8 transactions five years ago. When asked to name their preferred form of debit, 45% of respondents said PIN-secured versus 33% for signature. The top reason for the PIN preference was security, cited by 48% of respondents. A First Data spokesperson says the survey didn't ask about recent database breaches that compromised hundreds of thousands of PIN-debit card numbers and their encryption codes (Digital Transactions News, March 16). But widespread news coverage of those compromises apparently hasn't yet had much impact on consumers. “We realize there is fraud in all different payment types,” the spokesperson says. “What we have seen year after year is that consumers prefer PIN debit because of security.” Also, some 57% of PIN users reported that the ability to receive cash back at the checkout counter resulted in more usage of their cards. The survey summary says 16% of debit POS transactions involve cash back. A majority of debit cards in issue nowadays have combined signature/PIN functionality versus the original model of a PIN-based card for use at ATMs, though First Data does not have a breakdown on each type. Combined cards tend to get the most usage. Consumers who use both the PIN and signature functions account for 75% of all debit POS transactions. Such consumers conduct an average of 22.7 transactions per month versus 14.4 transactions for those who use only signature and 10 for those using only PIN. The survey didn't ask why, but “we believe consumers are becoming educated and they're seeing more places to use their debit card,” the spokesperson says. Star used research firm Applied Management & Planning Group to direct the telephone survey of nearly 14,000 randomly selected consumers in 35 states. The margin of error was plus or minus 1 percentage point at the 95% confidence level. This year's was Star's 19th such study. Other highlights: ? About 80% of U.S. consumers carry a debit card, and about 80% of cardholders have used their cards at an ATM or the point of sale in the past 30 days. Active cardholders used their cards an average of 16.4 times per month, with POS activity outpacing ATM usage by more than a two-to-one margin. ? While they may be aware of more places to use their cards, consumers nonetheless feel debit card information is lacking. Only 57% of cardholders say they are being educated about the use of PIN-secured debit for POS transactions, down from 67% last year. Similarly, only 44% claim they are informed about signature-based POS debit, down from 53%. Only one in five debit POS users believe “no liability” to be a solely signature-debit attribute, while 14% believe it is an attribute only of PIN-secured debit. (Visa and MasterCard offer so-called zero-liability protection for fraudulent signature-debit transactions, but those policies don't apply to PIN sales.) One in three believes it is a feature of both. And only 54% of debit POS users are aware of the cash back option with PIN-secured debit. ? Consumers 25 to 34 years old are the heaviest debit card users by age group, with nearly 16 total transactions per month. Among income groups, those making $80,000 to $100,000 per year reported the heaviest monthly POS usage at an average of 13.8 transactions. ? ATM usage declined from 2004 to 2005, with cardholder usage of their issuing institutions' ATMs most recently averaging 3.8 transactions per month and 1.5 transactions at foreign (other financial institutions') ATMs. ? The average volume of credit card usage at the point of sale declined from 7.2 times per month in 2004 to 6.5 times in the latest survey. ? Among the 70% of consumers having Internet access, 40% are paying bills online compared with 32% in 2004. Fifty-seven percent of online bill payers reported using their financial institution's bill-pay site while 45% set up one or more payments directly with billers.