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In the payments world where credit cards get all the attention for their rewards, fees, and promotional offers, one payment type is quietly driving billions of swipes per year.
Debit cards, which are linked to checking accounts and typically do not earn rewards, were used for 100.7 billion payments and generated $4.7 trillion in transactions in 2023, according to of the Federal Reserve most recent report But debit card Exchange. Comparing 2020 and 2021, transaction volume and dollar volume increased by more than 4 percent, but lagged behind growth from previous years.
“Both the volume and value of total debit card transactions grew at an average rate of 4.6 percent per year from 2021 to 2023, which is significantly slower than the average annual growth rate from 2009 to 2021 (7.8 percent by volume and 9.5 percent by value),” last week’s report said.
The report reviewed transaction data from 13 debit card networkSuch as visaand 166 card issuers.
Use of physical cards is still popular
The Fed’s study looked at a variety of data, such as how much people spent when they used their debit cards virtually. [“card-not-present” or “CNP”] vs. with physical cards [”card present” or “CP”]And how often consumers used the credit option versus the debit option at checkout when paying with their debit card.
Consumers used their physical cards for purchases 65.6 percent of the time and used the virtual version of their cards 34.4 percent of the time.
The total dollars spent with debit cards is due to consumers spending more – almost twice as much – when using the virtual version of their card compared to the physical version. However, the gap in purchase volume is narrowing, as e-commerce companies are adapting their sales practices.
“In 2023, the average transaction price of CNP transactions was once again higher than CP transactions at $63.96 and $36.99, respectively,” the Fed reported. “However, as e-commerce has grown in popularity over the years and expanded to include smaller value purchases, the average transaction value of CNP transactions has declined.”
Credit or Debit?
It’s likely that most consumers who use their debit card at the local grocery store or gas station have encountered the following question when swiping their card for payment: Credit [i.e. “dual-message”] or debit [i.e“single-message”],
According to The Fed, it turns out buyers have a clear favorite.
“Dual-messaging networks, which traditionally processed primarily signature-certified transactions, accounted for 71.4 and 72.9 percent of the total by volume and value in 2023, respectively,” the report said. “Single-message networks, which traditionally processed PIN-certified transactions, accounted for the rest.”