Discover: Online debit transactions soar
Pre-pandemic, consumers were using their debit cards online more than ever before.
According to the 2020 Debit Issuer Study conducted by Oliver Wyman for Discover Financial Services, card-not-present (CNP) online debit transactions surged 21% year-over-year in 2019. The study found that one CNP transaction type – account-to-account (A2A) transfers using debit – is the fastest-growing category of debit, doubling year-over-year and accounting for 40% of total debit growth.
These increases reflect growth in consumer use of debit to shop online, and to fund purchases and person-to-person transfers using apps such as PayPal, Venmo and Zelle. In addition, the study indicates that more business-to-consumer payments are being delivered via debit, including insurance payouts and payments to gig-economy workers such as drivers for ride-share services.
Overall, debit transaction growth in 2019 was fueled by a combination of a 3.1% rise in transactions per active card, a 2.3% increase in the number of cards in market, and a 1.1% rise in the number of cards used at least monthly by the cardholder.
The study found that, on average, cardholders performed 25.5 debit transactions per active card per month in 2019, including purchases, bill payments and A2A transfers. Average ticket size increased to $40.50 from $39.70 in 2018, and the typical debit card is now used for $12,400 in annual spend, both of which represent record highs in the study’s 15-year history.
In addition to greater use of debit in card-not-present environments, the average ticket size for these purchases is considerably larger than a transaction made with a card. The average card-not-present transaction totaled $61.48 in 2019, while the average card-present purchase totaled $34.10.
Mobile wallet payments using debit cards in 2019 jumped 94% year-over-year, reaching a record 1.3 billion transactions. Apple Pay accounted for approximately 1.1 billion (85%) of those transactions as it outperformed Samsung Pay and Google Pay, posting 100% growth year-over-year.
While the growth rate for card-present transactions was a more modest 2%, these transactions still represent 73% of all debit transactions.
“Card-not-present transactions already represent 27% of all debit transactions and are growing about 10 times faster than card-present transactions,” said Tony Hayes, partner at Oliver Wyman and study principal. “That growth will surely accelerate due to a surge in e-commerce, and a shift in many traditional card-present merchant categories, such as grocery and restaurants, to remote card-not-present ordering.”
Based on issuers’ stated plans in early 2020, 87% of debit cards are expected to be contactless by year-end 2022. Oliver Wyman expects the issuance, acceptance and use of contactless cards all to accelerate as a result of the COVID-19 pandemic, and contactless transaction volume to increase accordingly.