A recent report from Visa shows that consumers are using more debit cards compared to the other, more high-end option of credit cards as a result of the coronavirus outbreak. American consumers have a tendency of “not spending someone else’s money but spending [their] own money” during the times of economic instability. The payment-card company’s internal analysis found that the transition could drive away $100 billion annually from credit cards to debit cards.
“May was down 5%, but that’s 30 percentage points better than April. From a product point of view, debit continued to significantly outperform credit, which is common in these situations. But debit grew at 12% for the month of May and has seen positive growth since April,“ said Oliver Jenkyn, Visa’s North America group executive. “Credit’s still way down, declining at 21% in May versus the same month prior year.“
Visa’s analysis suggests that consumers are likely to pull a sizable chunk of their spending away from credit cards and onto debits cards in the coming years to avoid being in debt during the coronavirus pandemic.
“We’ve done some analysis internally based on the past, which suggests there could be $100 billion annually of credit to debit shift that happens over time.“
The coronavirus outbreak and healthcare restrictions that followed have led to a dramatic change in the digital payments makeup and a shift in consumer spending. Will the trend of consumer spending through e-commerce channels carry forth in the long-term? Visa’s report seems to support this assumption.
“From a channel point of view, not surprisingly, card-not-present, e-commerce growth, in North America, excluding travel, card-not-present excluding travel, up at elevated levels around 30%,” explained Jenkyn. “We’ve seen a 12 – in the month of April alone, we saw a 12 percentage point increase in the percent of total consumer spending that’s done in e-commerce. And that’s not surprising. Stores are largely closed, so people are going to e-commerce.”
Another trend outlined in the Visa’s report is growth tap-to-pay popularity.
“Tap-to-pay around the world has really become mainstream and the norm. It hasn’t in the United States. We’ve been pushing it for four years, and it’s been going really, really well. However, this is an incredible catalyst for it. Now you’re seeing – instead of us going out and talking to merchants or issuers, now they’re calling us. And then you can go to your local store where they’re saying, please use contact-less. The person behind me in line is tapping me on the shoulder and saying, hey, you can tap-to-pay with that.”
Currently, Visa has almost 200 million cards in the market in the U.S. The report suggests that Visa will have 300 million by the end of the year.