Debit Remains King, But Issuers are Being Cautioned by J.D. Power to ‘Adapt’ to Big Changes or Risk Losing Position / Fresh Today / CUToday.info (2024)

COSTA MESA, Calif.–While digital wallets continue to grow at an “astonishing pace,” the debit card is still king when it comes to overall utilization and customer satisfaction, according to new data released by J.D. Power data.

The finding is part of J.D. Power’s new Banking and Payments Intelligence Report, which dives into the findings of the J.D. Power 2024 Debit Card Satisfaction Study to spotlight the “prevailing sentiment and emerging trends in debit card usage, and how that may change with the continued uptick in the adoption of digital wallet brands.”

‘Higher Than All Other Methods’

According to the new report, overall, 72% of consumers say they use a debit card at the point of sale, either by tapping, dipping, or swiping their card in person or entering their account number online or in a mobile app.

“That’s higher than all other payment methods, including cash, credit cards and digital wallets,” J.D. Power said. “Debit cards also have the highest proportion (68%) of customers with a favorable impression of the payment method when compared with other forms of payment, such as credit cards, digital wallets and buy now pay later (BNPL).

“Customers under 40 years old continue to be the most likely users of debit cards (82%) and most likely to have a favorable view of debit cards (77%),” J.D. Power continued.

It added it found debit card providers that perform particularly well in the under-40 segment include Capital One, Chase and U.S. Bank.

Top Issuers Thrive on Fees and Security

According to J.D. Power, while debit cards “boast impressive marks, there is a wide variation of satisfaction level with debit card issuers among customers that use their cards at the point of sale.” Notably, J.D. Power said it found there is an 85-point (on a 1,000-point scale) difference between the top- and bottom-ranked issuers. Scores are most influenced by customer opinions about the reasonableness of fees and services charges and purchase limits, the analysis found.

“Security is also critically important to debit card users. Issuers whose customers say they keep them completely informed about security policies/protections receive the greatest boost in overall performance,” J.D. Power reported.

The company said the survey found BMO, Capital One, Citi, and Huntington all deliver strong results in the security dimension.

The Forecast

Looking forward, J.D. Power is forecasting:

• “While debit cards are maintaining their relevance in an increasingly crowded payments marketplace, we do expect that as digital wallets grow in popularity, there will be a slow deterioration in the share of customers tapping, dipping, or swiping their debit cards at the physical point of sale and manually entering their debit card information into a web or mobile check-out over time.”
• “The decline in debit usage will not necessarily result in less debit card spend for issuers. That’s because debit cards are used more often in digital wallets than credit cards,” J.D. Power said. “The risk for issuers is that customer affinity with their brand will likely take a hit as shoppers associate transactions with the wallet provider (say, Apple) instead of their issuer. After all, when a customer uses a digital wallet, the ease of use and positive connotations they feel is attributed to the technology company behind the wallet, not the debit card.”
• “Early Warning’s new Paze digital wallet represents an interesting strategy for overcoming that challenge by enabling the participating debit card issuing banks to retain brand relevance and the customer relationship within the digital wallets ecosystem. Our data shows that consumers who prefer to pay with debit are also more likely to be digital wallet users. Issuers that offer Paze and encourage their active debit card users to enroll should benefit most from a combination of continued spend and brand recognition.”

The Challenge

According to the J.D. Power analysis, at the physical point of sale, the “challenge to debit card issuers will continue to be: How can they reinforce the value of their brand to customers who are increasingly reaching for their phones instead of their cards?”
The answer, J.D. Power said, is that “issuers will have to find new ways to make themselves indispensable to the customer, possibly by focusing on value-added experiences related to budgeting, security, or rewards, all of which have strong influence on debit card user satisfaction when delivered well.

“One thing is for certain: the status quo only stays that way for so long,” the analysis added. “It’s up to debit card issuers to adapt to this environment or face losing their top-of-wallet position and brand relevance at the point of sale.”

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