Loyal debit card users don't want complications

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By: Wise Marketer Staff |

Posted on May 18, 2004

Loyal debit card users in the USA have made their opinions clear in a recent survey by Pulse EFT Association, showing that most users do not want to change the way they pay due to possible changes in the payments system such as reduced acceptance of debit cards or the possible assessment of new debit fees.

Regardless of which payment method consumers preferred, the survey's respondents united in opposing developments that could interfere with the use of debit cards, and many said they are willing to change where they shop should any such restrictions be implemented.

The study, which was commissioned by Pulse EFT Association and conducted by Analytica Inc., showed that consumers are demonstrating unexpectedly high levels of loyalty and satisfaction with regard to their preferred payment methods.

Loyalty is high
Participants were asked which of six payment methods (PIN debit, signature debit, cash, major credit card, cheque, or store charge card) they use most in grocery stores, at fuel forecourts, and at large retailers.

The survey revealed that consumers are more likely to choose one payment method over the others and are inclined to use it across all three retail settings, rather than varying their payment method according to the setting.

"The degree to which consumers are loyal to their preferred payment method has become striking, especially in the case of debit," said Pulse's president and CEO, Stan Paur. "The survey confirmed some of our long-held beliefs about why consumers are increasingly adopting debit payments, and further analysis identified implications for financial institutions and retailers."

Survey findings
The US payments industry has undergone a significant change in recent years, with the decline of cheque usage and the increasing adoption of electronic payment methods. Retailers settled their lawsuit against Visa and MasterCard, and one major retailer has stopped accepting debit MasterCard. Consequently, Pulse commissioned the survey of 716 debit card users to better understand these trends and their potential effects on consumers and retailers.

Six distinct payment loyalty segments were found:

  1. 23.5% pay most with PIN debit.
  2. 17.8% pay most with credit cards.
  3. 17.0% pay most with signature debit.
  4. 15.4% pay most with cash.
  5. 13.8% pay most with a debit card but place less emphasis on the verification method employed.
  6. 12.6% pay most with cheques.

Why debit ranked first
When asked to rate their satisfaction level with each of the payment methods, PIN debit purchasers reported being the most satisfied with their chosen payment method (scoring 9.6 on a scale of 1 to 10), followed closely by credit card users (9.5) and signature debit users (9.3). By comparison, cheque users' satisfaction was rated at only 8.1.

According to the survey, when consumers choose debit over other payment methods, it is chiefly because they believe it is faster and easier. The second most frequently cited reason for choosing debit is avoiding credit balances and interest. The option to receive cash back was rated much lower, and sweepstakes and promotions were found to have little impact on the choice of payment among debit users.

Why cheques ranked last
Cheque users expressed some concerns with cheques, suggesting that individuals in this group may be relatively easy to convert to paying with debit cards. Among those who pay predominately with cash, given a choice between cheque, credit card and the two types of debit, most indicated a preference for PIN debit. As a result, they would also be good candidates for a transition to the use of PIN debit.

In addition, the survey revealed some relevant findings for merchants that accept debit cards: regardless of their preferred payment method, consumers are almost universally opposed to actions that would inhibit the use of their debit cards.

Consumer backlash
When asked how they would respond if a merchant stopped accepting their debit card, 81.4% of participants said they would be "very unhappy" and 29.7% said they would stop using the merchant completely. If merchants began charging to accept debit cards, 79.2% of respondents would be unhappy and, of those, some 37.4% would switch to a different payment method, while 21.2% would stop using the merchant.

Similarly, if financial institutions began charging a fee for debit card payments, 85.3% of respondents would be "extremely dissatisfied" and 43.7% said they would change institutions.

The study
"This study clarifies consumer payment choices and provides the electronic payments industry with some guidelines for gauging potential cardholder response to a number of scenarios," concluded Paur.

An executive summary of the 2004 Pulse study, entitled 'Understanding Consumer Payment Choices in a Changing World', has been made available for download from the Pulse web site, and the full study is available to Pulse members at no charge.

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