Study: Debit transactions declined but outpaced credit

Sharp reductions in face-to-face restaurant and retail interactions during the Covid-19 pandemic last year resulted in fewer U.S. debit card transactions, a trend not seen in more than 15 years. Debit spending also surpassed credit spending for the first time in the history of the study commissioned by Discover Financial Services’ PULSE debit network.

Those findings come from transactions at 48 banks and credit unions that issue approximately 158 million debit cards and represent about 40 percent of the U.S. debit market. The study, released Aug. 17, found that the number of debit transactions declined 2.5 percent in 2020, the first dip in the 16-year history of the survey. Debit transactions declined to 76.1 billion in 2020 from 78.1 billion the previous year.

According to the study, while the number of transactions dropped, the debit dollar volume increased 8 percent year-over-year. The average ticket size increased to $44.80 last year from $40.50 in 2019, boosting debit volume to $3.4 trillion in 2020 and representing the largest upswing in the study’s history. 

“With many restaurants and retail locations closed for several months in 2020, generally people headed out less often which meant fewer debit purchases, but they stocked up when they did go out for groceries and other necessities,” said Tony Hayes of Oliver Wyman, which conducted the study for PULSE.

Other spending patterns also reflected his comments: Sparked by the increase in digital commerce, card-not-present transactions rose 23 percent year-over-year. Of the top 10 merchant categories for debit purchases, bookstores increased 57 percent, digital goods jumped 41 percent and home supply retailers spiked 22 percent. Transportation dropped 53 percent, restaurants and bars dipped 18 percent and fast food fell by 10 percent. 

The rollout of contactless debit cards increased from 11 percent of all debit cards in 2019 to 30 percent last year. Issuers reported that one-third of cardholders with contactless cards said they used the capability. That trend is only expected to accelerate: Ninety percent of national banks were issuing contactless debit cards by the end of last year. The study projected that contactless cards will make up 64 percent of debit cards by the end of this year.  

“Several debit trends that had been gaining momentum prior to the pandemic accelerated in 2020,” said Steve Sievert, PULSE executive vice president of marketing and brand management. “The shift to digital commerce and card-not-present transactions, adoption of contactless and use of debit for money transfers all leaped forward at warp speed.”

Other report findings included: 

  • Mobile wallets: Approximately 2 billion debit transactions were completed using the three major mobile wallets — Apple Pay, Samsung Pay and Google Pay — in the U.S. last year, a 51 percent year-over-year increase. Apple Pay expanded its lead over the other two wallets, accounting for 92 percent of such transactions. 
  • Money transfers: Account-to-account money transfers — peer-to-peer transactions, business-to-consumer transactions and cardholders funding their digital wallet accounts —  are booming. Account-to-account transactions per active debit card per month increased nearly 60 percent, building on 100 percent growth in the previous year.