News

Study confirms post-Durbin effects on debit card use

December 12, 2013

Debit card penetration in the United States has fallen from a high of 68 percent in 2011 to a low of 59 percent in 2013. A study from Mercator Advisory Group indicates that the downward trend is the result of consumers' growing use of prepaid cards and nontraditional payment forms. 

The Mercator report, "Consumers and Debit 2013: A Shift to Alternative Payments," from the research firm's primary data service, shows that demographics of debit card users in the U.S. are changing. For the first time in five years, young adults, who have been more likely than average to use debit cards, are now no more likely than average to use a debit card.

According to a news release from Mercator, debit card penetration among households that earn less than $75,000 a year is also declining faster than average. Meanwhile, use of general purpose reloadable prepaid cards is growing, particularly among young adults.

Half of consumers use check cashing, bill payment, money transfers, payday advance, short-term loans, and rent-to-own arrangements, bypassing services from banks or credit unions. Three-quarters of those who buy money orders and more than half of those who initiate money transfers do so from alternative financial service organizations such as supermarkets, discount stores and convenience stores.

The Mercator study examines the demographic shift and changing landscape of payments, including:

• debit card use; use of a broad range of payment services; brand awareness and use of eight brands of payment services; channels used for alternative payment services; account opening experiences; awareness of new fees and reaction to those fees, as well as other changes to checking accounts; and
• interest in new services for debit cards and willingness to pay for each service.

"There can be no doubt that the Durbin Amendment to the 2010 Dodd-Frank financial reform act is taking a toll on debit card ownership," said the report's author Karen Augustine, who also manages primary data services at Mercator, including the CustomerMonitor Survey Series. "Debit account fees that many banking institutions have found necessary to charge to compensate for revenue they lost due to Durbin's limits on debit card swipe fees appear to be leading important segments of the growing underserved population to shift to alternative financial services. Young adults who might have opened debit accounts appear to be thinking twice about debit cards in favor of other, nontraditional payment forms."

The report presents the findings from Mercator Advisory Group's CustomerMonitor Survey Series online panel of 3,003 U.S. adult consumers surveyed between May 28 and June 6, 2013.

Report highlights include:

• year-over-year trending of debit card ownership in the U.S. and the ways that consumers use debit cards;
• a shift in demographics of debit cardholders;
• comparison between consumers' use of traditional financial services such as banks and credit unions as opposed to alternative services such as supermarkets, discount stores, and specialty outlets; and
• statistics on U.S. consumers' use of various payment services, and their awareness and use of eight major brands.

Read more about trends and statistics.