More and More Consumers Use Visa to Make Small Purchases
August 25 2006
Visa USA today reported that its volume on purchases less than $25 in targeted small ticket segments totaled $27.3 billion in the first six months of the year, an increase of 17 percent over the same period in 2005. The double-digit growth indicates that Visa payment cards are increasingly being used instead of cash and checks for everyday purchases less than $25.
According to a new Visa-sponsored survey of 1,154 payment cardholders, more than half (55 percent) of the respondents use payments cards for small ticket items less than $25, citing several reasons for the shift. Consumers are turning to cards for everyday purchases for the convenience (86 percent), ease of use (62 percent), speed (45 percent) and expense management (35 percent) benefits cards offer.
"This significant increase in Visa usage demonstrates consumers' desire to make more small purchases, from coffee to transit and even laundry, on their payment cards," says Niki Manby, senior vice president, product innovation. "We're meeting this demand by giving them more and more places to use their cards. At the same time, we're helping merchants with traditionally cash-heavy businesses increase sales, enhance their customers' experiences and improve throughput."
Visa's small ticket strategy, expanded earlier this year, has helped accelerate card acceptance and usage at cash-heavy merchants. Visa's No Signature Required Program has made small ticket payments more convenient for merchants and their customers, by waiving the signature requirement for qualifying transactions less than $25 across 17 merchant categories(1). To further encourage acceptance, Visa's Small Ticket Payment Service offers acquirers decreased credit and debit interchange rates on consumer card transactions of $15 or less in 14 merchant categories(2). Visa is also driving speed, convenience and sales to merchants through Visa Contactless, an innovation that makes electronic payments up to 25 percent faster than cash transactions.
Generation P Drives Shift in Purchasing Behavior
Visa's survey results also revealed that Generation "P" or Plastic, referring to consumers ages 18-25, is leading the trend of increased use of payment cards for everyday purchases. Sixty percent of Generation "P" prefers payment cards for purchases less than $25, particularly in new and emerging segments such as digital content, vending machines, public transportation, parking and newspapers.
"Today's twenty-somethings are increasingly choosing payment cards for purchases of all sizes - from everyday purchases to big ticket items," explains Manby. "These consumers have come of age during a time when the immediacy of electronic information, communication and commerce are the norm. Generation P doesn't remember when ATMs and debit cards didn't exist; they want quick and easy access to their funds whether they are online or on the go."
Surging adoption of the Visa check card is also giving rise to the overall use of payment cards for everyday purchases. According to Visa's latest spending data, 78 percent of all purchases less than $25 made with Visa cards in targeted segments are made with the Visa check card. In Visa's survey, Generation P-aged respondents said they are more likely to use debit cards than other payment types, and often rely on debit cards linked to a bank account as an expense tracking tool. Generation P primarily uses debit cards for 44 percent of everyday, small purchases, compared to 33 percent of cardholders over 45.
Micropayments are on the Rise
Visa's survey also examined cardholder behavior for purchasing micropriced goods and services - purchases less than $2 - with credit and debit cards in both online and physical environments. Again, Generation P is at the forefront of the growth in micropayments with 70 percent of consumers ages 18-25 willing to use payment cards for purchases less than $2, compared to only 26 percent of consumers ages 45 and older.
In the past three months alone, one in three Visa survey respondents (35 percent) ages 18-25 have purchased a cup of coffee or tea using a payment card and one in five (22 percent) have purchased digital content. And Generation P would like to have even more places where they can make everyday, small ticket purchases with payment cards, including vending machines (55 percent), highway and bridge tolls (50 percent), parking (46 percent), taxis (47 percent) and public transportation (38 percent).
Adds Manby, "As consumers-at-large, and specifically Generation P, set the tone for the future of payments, Visa is focused on working with its merchant partners to encourage acceptance and develop innovative payment solutions that meet the needs of increasingly tech- and spending-savvy consumers."
About the Visa Generation P Survey
The Visa Generation P Survey is based on online interviews with 1,154 adult Americans who have a credit or debit card. The survey was conducted from July 24 - 27, 2006 using Survey Sampling International's online consumer panel SurveySpot™. Results of the survey have a margin of error due to sampling of no more than plus-or-minus three percentage points at the 95 percent confidence level.
The 17 merchant categories in No Signature Required include: Auto parking lots and garages, Bus lines, Car washes, Drug stores and pharmacies, Dry cleaners, Fast food restaurants, Laundries, Local commuter transport, Miscellaneous food stores, Motion picture theaters, News dealers and newsstands, Quick copy services, Restaurants, Service stations, Taxicabs and limousines, Tolls and bridges and Video rental stores
The 14 merchant categories included in the Small Ticket Payment Service include: Auto parking lots and garages, Fast food restaurants, Local commuter transport, Motion picture theatres, Restaurants, Taxis and limousines, Video rental stores, Bus lines, Car washes, Dry cleaners, Laundries, News dealers and newsstands, Quick copy services, Tolls and bridges.