How COVID-19 has elevated the role of debit and checking
Throughout the COVID-19 pandemic, the performance of debit has served as a bright spot for credit unions. While its usage suffered initially under stay-at-home orders, its recovery has been impressive. Recently, Visa’s Executive Vice President for North America, Oliver Jenkyn, spoke strongly about debit at the Baird 2020 Global Consumer, Technology and Services Conference – Visa’s internal analysis suggests there could be a $100 billion annual shift from credit to debit that happens over time.
While we’re still not sure what the long-term trajectory will be from the pandemic, several insights from PSCU’s weekly transaction trend analyses lend credibility to this aspiration and underscore the importance of debit for credit unions, including:
Debit has been swift to recover from the pandemic and is trending above historical growth rates. After the national spending splurge that occurred in early March, debit spending decreased by 19% two weeks later. Just three weeks after that debit growth was positive again, with spending up 6%. And with debit growth currently trending above 10% through June, overall debit spending has risen above its historical 7% mark, while credit card growth remains negative.
Debit growth has been strongest in card-not-present categories. Card-not-present transactions emanate from a variety of situations, including online purchases, recurring payments, digital wallets, etc. Historically, debit usage has lagged credit card usage in this category, in part because of perceptions around security. Since the start of April, debit card-not-present growth year-over-year has remained above 20%, with many weeks up 40% or more. Key online merchants like Amazon have shown continued year-over-year increases of over 100%. Digital wallets for ordering food delivery and groceries, etc. have shown similar growth. While we expect some tempering from greater-than-20% growth rates, debit is strengthening its top-of-wallet status across the card-not-present domain and shedding misperceptions around security.
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