Despite all of the recent innovations in the digital payments space, debit cards remain in demand and are widely used. In this article, we'll look at what's driving digital debit card usage.
Gen Z's Adoption of Digital Payments
It is likely no surprise that younger consumers are leading the way in debit card e-commerce transactions. One survey showed that close to half of Gen Z and Millennial consumers use their debit cards in digital channels. Between ages 25 and 40, Millennials are hitting their prime purchasing power. Gen Z, ages 11 to 26, are just starting to enter the workforce. As these groups age, their purchasing power and use of digital payment options will increase.
Because of the above demographics, merchants should expect digital payment options to continue growing. Additionally, Gen Z and Millennials will continue to push digital payment innovations, which translates to more spending (i.e., CapEx and marketing) in this category if merchants are going to keep up.
Increase in Card-Not-Present Transactions
For obvious reasons, card-not-present (CNP) transactions saw an overall increase during the pandemic. However, that growth has not wavered. The CNP infrastructure was improved during the pandemic, and consumers latched onto this convenience. Improvements came in the form of digital wallets, contactless cards, and, of course, all integrated into mobile phones. Growth in CNP transactions has continued, according to the latest 2023 PULSE® Debit Issuer Study.
In 2022, the study found that CNP transactions increased more than 3% year-over-year (YoY). Digital purchases and payments currently make up 1/3 of debit transactions.
The convenience of mobile phone payment integrations led to a 7.6% YoY decline in PIN-authenticated CP transactions in 2022. Given the consumer's focus on mobile wallets, merchants are spending time and resources to ensure they are available on all the top digital wallets.
Debit A2A Transfers
Debit account-to-account (A2A) transfers remain popular. Although, that popularity has come off the highs seen in 2021 (i.e., 6% in 2022 vs. 20% in 2021). A2A transfers are regularly used for business-to-consumer disbursements, peer-to-peer payments, and gig-economy wage payments.
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