Academic journal article ABA Banking Journal

Debit's Growing Popularity

Academic journal article ABA Banking Journal

Debit's Growing Popularity

Article excerpt

After a gradual climb during the '90s, debit's use has spiked twice in recent history to surpass all other methods in most consumer age groups. This makes it a workhorse of the payments system on par with credit cards, an annual joint survey conducted by Dove Consulting and the ABA indicates.

These days, debit accounts for 33% of all point-of-purchase outlays, continuing to shine in an environment where 55% of all payments are electronic. Growth in debit at a retail outlet has come at the expense of paper checks.

Coaxed past security fears and unfamiliarity, users have also taken to paying bills online, resulting in 45% of all recurring bill payments being handled with a click or two of a mouse.

"There is the perception out there that checks dear more slowly than electronic paper types," notes Tony Hayes, vice-president, strategy and organization effectiveness group, at the Boston-based research organization. "Consumers want speed and ease of use when it comes time to pay a bill."

Rewards provide an incentive for consumers to make recurring payments using their credit or debit card. Such incentives also affect the type of automatic payment consumers choose to use. Not only are younger consumers in particular more comfortable with newer payment forms, they are making a decisive move away from paper. Between 1995 and 2003, migration occurred at a rate of 3.8 percentage points. Between 2000 and 2003, that average rate was up to 4.3 percentage points.

"The consumer switch to electronic payments is increasing across the board, albeit at different rates," says Jane Yao, ABA's managing director of benchmarking and survey research.

"We know that consumer use of electronic payments for in-store purchases has increased steadily for years and much of that 'easy' migration has already occurred," Yao adds. "This year's survey results show that electronic bill pay is quickly catching up to other forms."

Payment preferences profited

The 2005/2006 Study of Consumer Payment Preferences, as it is called, is the fourth in a series of consumer research studies tracking the evolution of the U. …

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