Friday, July 18, 2008

Debit Growth Continues at Torrid Pace

This 3rd edition of Debit Cards in the U.S. continues the story told in Packaged Facts' May 2006 analysis of this market...Growth.

The most notable ongoing feature of this market is its "astronomical growth." Packaged Facts estimates that transaction volume doubled between 2003 and 2007, and dollar volume escalated at a compound annual growth rate (CAGR) of 20%.

The battle between issuers and merchants persists over online, or PIN debit (preferred by merchants) Editor's Note: (AND Consumers) and offline, or signature debit (preferred by issuers), as do the interchange wars.

As predicted, rewards programs are driving market growth, debit fraud is on the rise, and younger consumers and prepaid debit are key elements in issuers' growth strategies.

The market remains dynamic, and much has transpired in the past two years. Most dramatically, Capital One has turned the industry upside-down with its "decoupled debit" program, which enables merchants to issue co-branded cards linked to a customer's current bank account. This has significant advantages for consumers and merchants, but significant disadvantages for banks, who stand to lose interchange revenues. Retailers are also turning to other alternative payment networks to bypass interchange.


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