[Dave Birch] One impact of the credit crunch, or whatever you want to call it, is that consumers are shifting their spending from credit cards to debit cards. Or, more accurately, consumers are shifting their spending from credit cards to debit cards even more quickly than they were before. This is hardly news, as it has been recognised for some time that debit volumes are growing substantially faster than debit transactions.
debit purchases are expected to climb 13% in 2008, to $1.2 trillion, according to The Nilson Report, an industry newsletter—compared with a 3% rise, to $1.9 trillion, for credit-card transactions. At Visa (V), the No. 1 card company, debit spending could surpass credit this year.
Debit is clearly a product that consumers like. The debit space is not only attracting issuers and consumers, but others as well, with innovative products extending the reach. An example that caught my eye last year, illustrating an area where there is considerable growth potential for 2009, was the use of the debit infrastructure for welfare payments.
Under the five-year agreement, unemployment insurance benefits will be available on a MasterCard-branded debit card that can be used to access funds at banks and ATMs, and to pay for goods and services. Through a partnership with Bank of Oklahoma, cardholders will receive special opportunities for fee-free ATM and teller withdrawals.
[From Finextra: ACS provides debit cards for unemployment benefits in Oklahoma]
This kind of scheme shows that it is new applications, as well as new merchants and new customers, that will drive debit (and, I am convinced, pre-paid) in the near future.
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