Contactless Next-Gen Debit Making Gains

Debt markets contract during economic downturns — a point the pandemic is proving beyond the shadow of a doubt as debit usage causes a near-total eclipse of credit in Q2 and after.

PYMNTS latest Next-Gen Debit Tracker® done in collaboration with PULSE, A Discover Company, notes, “Many shoppers are turning to options like contactless debit cards that can be waved over POS terminals, or they may be steering clear of brick-and-mortar locations altogether by simply buying their items online or via apps.”

“Retailers are working to accommodate these new preferences, too, with some merchants enabling contactless payment acceptance for the first time and others planning to improve their eCommerce offerings. Digital shopping’s rise means retailers and financial institutions (FIs) must ensure they can handle card-not- present (CNP) transactions that are safe and convenient.”

Safety and convenience are twice as valuable when it’s your money (debit), and not the bank’s (credit). The September Next-Gen Debit Tracker® examines consumer behavioral shifts that are taking on an air of permanence as recovery and reopening unfolds all around.

Broader Applications To Come

Card-not-present (CNP) debit transactions increased geometrically since COVID-19 came to town, meaning merchants need to focus on the desires of these users foremost right now.

“We saw a dramatic increase in card-not-present (CNP) debit transactions across grocery [and] big box retailers, quick-service restaurants (QSRs) and online bill pay,” Jennifer Schroeder, executive vice president of product management at PULSE, told PYMNTS.

“We’re also seeing merchants focus on minimizing the interactions a consumer has with a payment terminal by working to accelerate the support of PINless debit. We expect some of this to persist, especially in grocery [stores] and restaurants, where the benefits tap into other macro trends that were taking hold prior to the pandemic, such as a desire for convenience and greater speed.”

Schroeder added, “We consider grocery [stores] and restaurants to be the model for a much broader application of pre-pay and pickup/delivery among a meaningful and growing variety of merchants.” It’s also working well in the automotive parts, electronics and pet food and supplies sectors, “and we expect debit in these categories will continue to perform well.”

Touchless Debit Is Now The ‘Go To’ For Millions

Quantifying the shift to digital debit is getting more predictable as data accumulates.

Using the example of Discover Financial Services’ Q2 2020 earnings, for example, the new report states, “The company’s recently posted results showed a decline in spending across its Discover credit card network along with a 12 percent jump in debit spending over its PULSE network. Debit purchases hit $52.9 billion in Q2, compared to $47.4 billion for the same quarter in 2019. Discover explained in an investor presentation that it believes ‘the pandemic, the impact of [federal] stimulus funds available to consumers and growth in eCommerce transactions’ spurred the sudden spike in debit usage among worried consumers.”

Combined with touchless, it makes an undeniable case for newfound uses of next-gen debit.

“Many consumers who have begun using contactless payments may be disinclined to stop,” the report states. “A recent survey of 1,000 U.S. shoppers “who are familiar with contactless payment cards” found that 75 percent reported them as their go-to purchasing instruments.

Another 61 percent of respondents said contactless “is a factor in determining which payment cards they use.” Consumers were mostly satisfied the cleanliness and speed of these debit transactions, noted by 70 percent and 67 percent of respondents, respectively.”