Gift Card and Online Bill Pay Soar as Consumers Embrace Electronic Payments
October 25 2005
Consumers continue to embrace an expanding array of payment choices, according to a nationwide consumer-payment preferences study conducted by the American Bankers Association and Boston- based Dove Consulting, a division of Hitachi Consulting. ACI Worldwide, Citigroup, The Clearing House, and MasterCard sponsored the research.
The 2005/2006 Study of Consumer Payment Preferences found that for the 58 individual payment choices consumers make each month — whether in stores or over the Internet, or while paying bills — consumers choose electronic payments more often. Cash and checks now account for only 45 percent of consumers' monthly payments — down from 57 percent in 2001, and 49 percent in 2003.
"The consumer switch to electronic payments is increasing across the board — albeit at different rates," said Jane Yao, ABA's managing director of benchmarking and survey research. "We all know that consumer use of electronic payments for in-store purchases has increased steadily for years and much of the 'easy' migration has already occurred. This year's survey results show that electronic bill pay is quickly catching up."
Consumer migration to electronic payments for in-store payments is driven by the popularity of debit cards, which has grown at the expense of checks. Six years ago, debit represented 21 percent of in-store transactions. Today 33 percent of in-store purchases are made with debit cards.
The biggest change is in the area of gift cards, which account for 4 percent of all in-store purchases, up from 2 percent in 2003. Consumers' use of gift/prepaid cards for at least one purchase per month in stores increased from 12 percent in 2003, to 32 percent in 2005. Twelve percent of consumers plan to use gift/prepaid cards more often over the next two years.
Checks are losing ground in the area of bill payment, as more consumers turn to automatic and online bill payment. Today, 52 percent of consumers use automatic payment to pay at least one bill per month, and 39 percent of consumers use online bill payment — especially for paying multiple bills. Checks account for less than half of consumers' monthly bill payments — only 49 percent — down from 72 percent in 2001, and 60 percent in 2003.
"Across all payment venues, debit is emerging as the clear winner," says Tony Hayes, vice president of the financial services group at Dove Consulting. "Debit is now tied with cash for the highest share of consumers' in-store purchases, and a third of all consumers report that debit is the payment method they use most frequently in stores. Consumer use of debit for online purchases and bill payments is also increasing — particularly if they receive rewards."
The 2005/ 2006 Study of Consumer Payment Preferences is the fourth in a series of biennial studies tracking consumers' payment habits and preferences. The study of 3,008 consumers is $500 for ABAmembers and $2,000 for non- members. For more information, call 1-800-BANKERS or visit http://www.aba.com.