Study: POS Debit Rises, While Consumers Confirm PIN Preference

The use of debit cards for point-of-sale purchases is rising sharply, while cardholders continue to prefer PIN debit over signature debit, according to a study released recently by the Star electronic funds transfer network, a unit of Denver-based First Data Corp. The study is the latest in a series of annual debit reports the network has sponsored since 2002. Among consumers surveyed for the study last fall, some 74% reported having used a debit card for a POS transaction within the past 30 days, up from 70% in 2006 and 62% in 2005. The increase in POS usage was most pronounced among consumers who earn $100,000 or more, with three-quarters reporting usage within the previous 30 days compared with 69% in 2006. By age, the increase was greatest among those in the 25-to-41 group, where the usage rate rose from 77% to 82%. At the same time, reasons for not using a debit card for purchases are weakening, according to the survey. Only 48% of respondents said they preferred other means of payment (cash, credit card, or check) in 2007, down sharply from 62% in 2006. Again, these preferences depend critically on income. Nearly two-thirds of those earning $100,000 or more per year preferred other means, with a strong preference for credit cards. By contrast, just 38% of those earning under $50,000, and 51% of those in the $50,000-to-$100,000 range, had a similar preference for other payment methods. The study also asked those respondents who had not used their debit cards for POS purchases within the past 30 days what features would encourage them to start using their cards at the cash register. Scoring highest on this list was fraud protection and assurances of no liability for fraud (70%), followed by ease of use (68%). The lowest scores were registered by avoiding pocket change (34%), attraction of the latest technology (32%), and family-member sharing of cards (26%). As has been the case since 2002, consumers preferred PIN debit in the latest survey over signature debit, with 54% opting for PIN, 38% for signature. Some 6% said they like both equally or don't care about the matter. This mirrors the results in 2006 and shows a significant increase for PIN since 2005, when 45% opted for that method of authentication. The leading reason consumers give for preferring PIN is their perception that PINs offer greater security, with 44% citing this reason. This result has changed little over the years, despite news stories over the past year or so in which criminals have gained access to PINs with rigged devices and used the data along with fake cards at ATMs to loot consumer accounts. Overall, respondents report making on average 24.6 POS transactions in the previous 30 days, flat with 2006. Of these, 13.6 transactions were performed with PINs and 11 with signatures. While PIN-only users made fewer transactions (12.2) than exclusive signature users (16.9), those who use both methods tended to use PINs more often than signature (23.3 total, with 14.3 using PINs and 9.1 signature-based). For the latest report, which Star calls its “Consumer Payments Usage and Segmentation Study,” the network sponsored a survey of 3,523 consumers age 18 or older, conducted in a random phone canvass between Oct. 31 and Dec. 2 last year.