Debit is beloved by the masses, still standing as an original bastion of spend control even as the digital transformation of payments rolls on with shiny new tools and toys. Happily, debit is keeping up with pandemic-era payments trends, and even pulling ahead in some ways.
PYMNTS’ May 2021 Next-Gen Debit Tracker®, done in collaboration with PULSE, a Discover company, is a compendium of debit innovations coming to market in 2021, namely the increasing union of debit card accounts and new models like buy now, pay later (BNPL).
Per the new Tracker, “The pandemic is leaving an indelible mark on consumers’ spending preferences, as many restrict purchases to essential items and tap into new digital payment methods — sometimes for the first time in their lives.”
Noting that solutions like digital wallets may “account for 41 percent of all online payments volume in North America by 2024,” the Tracker adds that “many consumers — especially those from younger generations — are eager to pair trusted and familiar products like debit cards with emerging payment options like mobile wallets and peer-to-peer (P2P) apps.”
This fondness for solutions that manage money and avoid debt points to a “considerable revenue potential for financial services providers with offerings that hit the mark.”
Debit Doing Its Part For Financial Literacy
Debit’s appeal to younger demos is well-documented. The latest Next-Gen Debit Tracker® goes further, stating that “Gen Z consumers [demonstrate] a decisive preference for debit cards, with 44 percent ranking these tools as their most preferred payment method. This signals that combining superior mobile experiences with debit-based payment options could be a winning formula for financial services providers looking to attract a younger consumer base.”
On the minds of the younger consumer base as well is contactless mobile, and the touchless doors it opens for new payments experiences to dazzle people closely minding their spend. One thing holding it back now is a confidence gap among younger cohorts over finances in general.
“Gen Z consumers are making their preferences for customer service-focused mobile and debit solutions known, but new research indicates that these solutions could reach a greater share of consumers if they had more knowledge about them,” per the Next-Gen Debit Tracker®.
It adds, “One study found that 74 percent of Gen Z consumers were not confident in personal finance matters, and almost half said they were unfamiliar with creating a budget. An additional 32 percent were unable to point out the differences between credit and debit cards.”
Debit issuers should note that nearly three-quarters of Gen Z consumers said they would “value additional education regarding financial topics, and 38 percent are taking to YouTube to learn about topics such as investing and personal finance.”
Debit Isn’t Just For Younger Demos
The pandemic has driven greater use of debit, as might be expected — and despite the granular generational differences in debit usage, it has gained fans in part due to COVID-era effects.
According to the May 2021 Next-Gen Debit Tracker®, a recent report found that U.S. debit payment volumes rose 21 percent year over year in the fiscal quarter ending Dec. 31, 2020.
“The pandemic has been partially credited with fueling this demand, as consumers who would typically use cash are turning to debit because of cash’s perceived lack of cleanliness. Many consumers are also shifting their purchasing toward essentials and everyday expenses as they work to conserve funds, and debit has long been more popular than credit for such spending.”
These preferences “reflect life experiences,” per the Tracker, “and banks have the opportunity to put the right products in front of them to meet their needs every step of the way.”