(by G. Andersen)

Debit cards are growing as the most popular consumer payment option, and as such, banks and credit card issuers are having to adapt their strategies to the implications of this growth. At end-2003, Visa International reported that for the first time, its global debit volume had surpassed its credit card volume at a respective USD 1.48 trillion, versus USD 1.45 trillion. Visa also cited a Global Insights survey showing global cash and check payments to have declined by a respective 4 per cent and 7 per cent since 1999, at the expense of debit, according to Electronic Payments International.

Europe is the world’s most developed debit card market and in Q1 2004 had the largest Maestro cardholder base, at 242.3 million cards. In the US, about 287 million debit cards are in use, according to the Federal Reserve, and by 2005, analyst Ted Iacobuzio, of MasterCard’s research firm, Purchase Street, predicts debit card spending volume to be about USD 900 billion, up from USD 100 billion in 2003. Within North America, Morgan Stanley Research similarly predicts debit cards to account for 13 per cent of consumer spending by 2007, up from just 7 per cent in 2002.

With the ABA confirming US consumers to have used credit and debit cards more often than cash to pay for goods and services in 2003, the Federal Reserve is to cut its check processing centers to 23 by 2006, down from 32 at end-2004 and 45 in 2003. Debit cards, which facilitated one in three store purchases in 2003, are driving this shift, with the ABA finding check payments to have fallen to 15 per cent of all payments in 2003, and cash, to 32 per cent, down from 39 per cent in 1999. Credit cards, by contrast, held their 20 per cent share of all purchases made in the US between 1999 and 2003.