A nationwide consumer payment preferences study conducted by the American Bankers Association and Boston-based Dove Consulting documents the growing popularity of debit cards. The "Study of Consumer Payment Preferences" found that between 1999 and 2003, the number of consumers using debit cards to make in-store purchases increased from 48 percent to 57 percent (for PIN-based purchases) and from 42 percent to 54 percent (for signature debit purchases).

"All trends indicate that debit is an increasingly popular form of payment at the point-of-sale, and this study validates this phenomenon," said Cindy Ballard, executive vice president of PULSE EFT Association, one of the study's three sponsors. Indeed, PULSE reported that its PIN debit transaction volume has increased by more than 220 percent over this timeframe.

PIN vs. Signature Debit
Today, 94 percent of debit cardholders have a card with either a Visa or MasterCard logo, meaning that (in most cases) they have a choice at the point-of-sale whether to enter their PIN or sign the receipt. Some consumers use their cards exclusively with a PIN (19 percent), and other consumers are exclusively signature debit users (14 percent), but the most consumers report using both forms of debit (49 percent).

Given this choice between PIN and signature debit, both methods have strong support from consumers. Overall, 45 percent of debit cardholders prefer to enter a PIN when using their debit card for purchases, as compared to 38 percent who prefer to sign a receipt. Only 17 percent of debit cardholders said they did not have a preference for PIN or signature debit when making purchases.

Debit Taking Share from Checks and Cash
Increases in debit payments are steadily eroding the use of cash and checks. In 1999, cash and checks together accounted for nearly 60 percent of consumers' in store payments, while debit (both PIN and signature) accounted for only 21 percent. In 2003, 31 percent of payments were made with PIN and signature debit, while less than half (47 percent) were made using cash or checks. The percentage of payments made using credit card remained stable over the timeframe.

"Consumers are migrating more and more of their payments from cash and checks to debit cards," said Michael Feliciano, senior vice president and division executive of electronic payments at eFunds Corporation. "For a growing number of consumers, debit cards are their primary or preferred payment mechanism—they use them for everything."

Conclusion
"Whether it be PIN- or signature-based, debit is supplanting other forms of payment, particularly cash and checks, at an unprecedented rate," said Jeff Hale, senior vice president and chief marketing officer at ACI. "Our U.S. customers are seeing solid growth in their debit POS volumes, and the experience in countries like Canada and the UK suggests that once the 'knee in the curve' is reached, debit rapidly overtakes paper-based methods."

As today's younger consumers age, so the segment of the population representing active and frequent debit users will grow. Combined with new applications and new users, the market for debit payments will continue to expand at double-digit rates for the foreseeable future.