Study of Consumer Payment Preferences by the American Bankers
Association, and Dove Consulting - ATM Marketplace Research,
Consumer Use of ATM and Debit Cards, ATM and Debit Research


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Consumers Now Favor Debit over Cash and Checks

WASHINGTON, DC For the first time, electronic payments have surpassed cash and checks as consumers' preferred payment method for in-store purchases, according to a new nationwide consumer payment preferences study conducted by the American Bankers Association and Boston-based strategy consulting firm Dove Consulting. The research was sponsored by ACI Worldwide, eFunds Corporation and PULSE EFT Association.

The 2003/2004 Study of Consumer Payment Preferences found that cash and checks now account for 47 percent of consumers' in-store purchases, as compared to 57 percent in 1999 and 51 percent in 2001. This evolution of payment behavior continues to be driven by the increasing popularity of debit cards. Four years ago, debit represented only 21 percent of in-store transactions; today consumers report that nearly one out of three (31 percent) in-store purchases are made with a debit card.

This growth in debit card use has come at the expense of both cash and checks. While cash remains the single most frequently used payment method in stores, its share of the transaction mix has fallen from 39 percent in 1999 to 32 percent in 2003. Checks also play a diminishing role at the point-of-sale, accounting for just 15 percent of purchases. Comparatively, consumer use of credit cards for in-store purchases has remained relatively constant at 21 percent. At 2 percent, the "other" payments category is made up of prepaid cards.

"While in-store payment habits develop early for most consumers, they are by no means static," said Jane Yao, ABA's managing director of surveys and statistics. "Consumers will continue to look for and migrate toward new payment methods that satisfy their payment needs."

This migration in consumers' payment behavior is occurring across all payment venues: in stores, for bill payments and for Internet purchases.

Consumers still prefer to pay their bills by check, but electronic methods are gaining in popularity. In 2001, 72 percent of recurring bill payments were made with checks; today, this percentage has fallen to 60 percent.

"Decreasing check volume represents an enormous growth opportunity for electronic payments," said Tony Hayes, managing director of Dove's financial services practice and author of the study. "As consumers write fewer checks for bill payments, financial institutions and payment organizations have the ability to play an active role in influencing what payment methods are used in their place."

This decline in check volume is due in part to increasing consumer adoption of automatic payment and online bill payment. Today, 60 percent of consumers use automatic payment, with only 30 percent of consumers having never tried automatic payment. While adoption of online bill payment is lower than automatic payment 41 percent of consumers currently use online bill payment it represents one of the fastest growing payment methods.

Source: American Bankers Association

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