COLUMBUS, Ga.—Is debit losing its luster?
A new study indicates that while debit cards were again this year the most preferred payment type, a downward trend among those who prefer debit continues.
The TSYS fifth annual research study on U.S. consumers' payment preferences showed a narrowing in the number of respondents who prefer to use their debit card over their credit card.
This year, 41% of survey respondents preferred debit when given a choice versus 35% who preferred credit. The debit preference has fallen from 49% in 2013 and 43% in 2014 to 41% in 2015, TSYS said. During this same period credit preference remained relatively constant at around 35%.
The online survey of more than 1,000 U.S. participants also uncovered drivers of consumer behavior.
“The reduction in debit appears to be due to respondents preferring cash and PayPal or other alternative payments at a higher rate than that of last year’s study,” the company stated. “Every year, consumers take many actions when it comes to managing their finances and making payments.”
To understand the type of actions consumers are taking, TSYS presented participants with a list of actions and asked them to choose all that applied.
“The top action consumers said they took over the past year was making a purchase using a credit card on file at a retailer. Included in our list was whether they began saving more, paid down debt or borrowed to make a large purchase,” TSYS explained.
Thirty-three percent of survey respondents said they paid down debt over the last year, 28% said they began saving more and 5% said they borrowed to make a large purchase.
“To best serve consumers’ needs it is crucial to understand the actions consumers are taking. Loyalty and rewards are very important in driving consumer behavior and affecting their payment choices,” the company said.
Consumers typically look for an incentive when choosing one payment option over another, TSYS said. Fifty-eight percent of survey respondents said that they have a rewards program attached to their most preferred payment type. When looking only at the respondents who said their most preferred payment type was a credit card, 86% said there was a rewards program included with their card.
“This indicates that loyalty and rewards programs are even more important when consumers are choosing between multiple credit cards and not just one payment form over another,” TSYS said. “The responses to our survey also indicated that programs that provide cash back or cash equivalents are the most sought-after reward programs.”
As traditional financial institutions increase their emphasis on innovation and nontraditional companies begin offering financial services, the use of mobile devices to manage financial related services remains a point of focus, TSYS said.
“Consumers are still more interested in using digital services that help them manage and protect their finances than they are in using a mobile device to actually make a payment,” the company explained. “As mobile payment offerings increase, there remains an opportunity to accelerate the adoption of the payment services. According to our survey responses, mobile applications provided by financial institutions are highly adopted and frequently used. The respondents to our survey most often used the financial institution mobile app to verify balances and view recent transactions.”
In order to increase mobile adoption in financial services and payments, TSYS said it is important that industry participants understand how consumers are using their devices today and how they are interested in using the devices in the future.
“Financial Institutions are constantly interacting with their customers through communication and marketing activities. New this year, we included questions in our survey such as ‘How would you like to receive communications?’ and ‘How frequently would you like to receive communications?’ The intent was to provide financial institutions and industry participants an understanding of how their consumers would prefer to interact with their financial services provider,” TSYS said.
The survey indicated that the most preferred frequency of marketing/special offer communications is once a month. Also, the most preferred communication channel — across multiple communication types — was e-mail.