“Consumer behavior has a tendency to be very durable.”
David Schneider, president of PULSE®, part of Discover® Global Network, acknowledged to Karen Webster that we’ve all gone online in the past three years to use digital payments — if we hadn’t been doing so already.
But amid the macro headwinds, he said, the tried and true methods are top of mind and top of wallet.
“We’ve been amazed at the resilience of debit,” he said, “and it’s been, consistently, the preferred form of payment.” In the most recent earnings report from Discover Financial Services, the company noted that PULSE volumes were up 3% year over year, driven by debit transactions.
That spells opportunity for financial institutions (FIs) to remind consumers about the value inherent in those cards — and in the current environment, using debit accounts as a budgeting tool to spend what’s on hand.
But beyond the current macro landscape, debit transactions will prove to be among the most durable payment methods out there, especially in omnichannel commerce, Schneider predicted. The durability will extend through at least the next three to five years. And debit has the potential to lead consumers toward new, online payments offerings.
Simply put, he said, “many consumers find it’s easy to do things the old way.” The 2022 “PULSE Debit Issuer Study” revealed that, despite the fact that contactless card issuance has been north of 70%, of FIs’ issuance, contactless payments are only about 6% of in-store payments. The technology’s out there to change consumer behavior, but adoption has been slow.
For the providers — the FIs that are in PULSE’s interbank electronic funds transfer network — the best way to change consumers’ minds about trying something new is to take advantage of what they already know … incrementally. “While newer technologies prevail in the long run, it has been said bankers are never able to get rid of the older technologies they replace,” he told Webster.
To help guide new payments behaviors, Schneider said, FIs need to get out there and tell a story about how these new technologies and payments options can be beneficial in everyday financial activities. FIs have built up trust and confidence from their members and merchants over the years. In the latter case, the merchants, he said that the network effect and partnerships can improve authorization rates, reduce cart abandonment, and increase sales conversions.
“My children who are millennials don’t use checks, but there are still a significant number of transactions still being done by paper checks and cash payments,” Schneider said, “And there are benefits that can be delivered by the traditional payment rails, complemented by the emergence of digital ecosystems, that deliver rewards on spending, or handle chargebacks and disputes with speed and efficiency.
“Eventually, checks will ‘age out’ of the system,” he said.
In the meantime, there’s still a need to familiarize customers with the payment options they do have — and that are on the horizon. Debit, in particular, can be a springboard in prodding new consumer behaviors. He noted that 51% of consumers have used debit for bill payment, which demonstrates significant growth over recent years — but that leaves roughly half of consumers who have yet to do so.
And despite decades of progress in modernizing payments, there’s still untapped potential and opportunity, specifically in peer-to-peer (P2P) payments and account-to-account transfers.
Looking ahead, Schneider said, real-time payments — notably account-to-account payments — will open up new opportunities for consumers to wield debit in a variety of settings. As he noted to Webster, “Debit has sort of been the original faster payments.” PULSE, he said, authorizes those payments in fractions of a second at present. The network has expanded into account credit transfers and P2P to meet the evolving needs of the growing gig economy.
Asked by Webster how payments and card-focused spending behaviors will evolve in an omnichannel landscape, he said, “Over time, omnichannel’s going to carry a lot of weight.” Consumers become more comfortable with ordering online or through an app, and journeying to a brick-and-mortar setting to pick up what they’ve ordered, using a variety of methods.
As he told Webster, for digital payments, he said, “The breathtaking trajectory that we experienced in the last couple of years may not continue, but it’s not going backwards. … The convenience and the benefits that come from digitally transacting in a card-not-present kind of world will continue to be important for consumers.”
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More