A recent analysis of debit trends found that active cardholders made an average of 34.6 debit transactions per month last year. The study highlighted a 4% year-over-year increase in both the number of debit transactions and the dollar volume associated with them.
According to the report from Discover-owned PULSE, the majority of debit payments occurred at the point of sale. On average, consumers conducted 30.7 point-of-sale transactions, two account-to-account transfers, and nearly two ATM transactions per month in 2023.
Consumers are also spending more, with the average debit purchase increasing to $46.89, up 3.4% year-over-year. The adoption of digital debit cards is rising, as card-not-present transactions accounted for 36% of debit transactions in 2023. Additionally, Both debit payments initiated by mobile devices and the number of debit cards linked to digital wallets rose last year.
Debit Industry Trends
One of the key trends in the debit industry is digital issuance, where a financial institution delivers a user’s debit card credentials to a digital wallet before a physical card is issued. Digital issuance provides consumers with a debit card they can use immediately, and cuts costs for financial institutions.
Though the debit industry is growing, Discover highlighted three trends that could impact debit issuers. These include the pending reduction in debit interchange fees for issuers with over $10 billion in assets, increased competition from both traditional financial institutions and digital-first upstarts, and the growth of instant payments systems like FedNow and RTP.
Steering Toward Debit
These trends are unlikely to slow the shift toward debit card payments in the short term. With fewer customers carry cash, merchants have begun to steer customers toward debit card payments as an alternative to credit cards, which often come with high interchange fees. Many retailers prefer debit card payments over cash because consumers tend to spend more in card transactions.
As a result, some retailers have begun to offer customers discounts if they use debit cards at the point of sale. That trend has been echoed by cellphone carriers like Verizon and T-Mobile who have steered their customers toward autopay using a debit card or bank account.
While efforts from retailers likely play a part, the most compelling drivers for the increase in debit payments could be the soaring APRs and increasing potential for delinquency that comes with credit cards.
“The PULSE report has intriguing data, but it leaves out the consumer sentiment,” said Sophia Gonzalez, Debit Payments Analyst at Javelin Strategy & Research. “Debit payments could be gaining popularity because consumers would rather use their liquid funds than accrue debt on credit cards.”
“It’s a given that merchants will look for ways to reduce their overhead expenses, including any interchange fees, but it’s not a given why consumers are opting for debit over credit,” she said. “It’s quite likely that the tough economy is deterring consumers from racking up debt, but more research is needed.”