Debit spending is on the rise, but is it here to stay?
Consumers in North America are making an unprecedented shift away from cash and towards debit spending. Here, Visa’s Dan Sanford, Senior Vice President, Corporate Strategy and Development, explains the factors at play – and whether the trend can continue post-COVID-19.
A year into the pandemic, debit spending is emerging as a clear winner in the U.S. payments landscape. In the first quarter of Visa’s fiscal year, ending December 31, U.S. debit payments volume increased 21 percent year-over-year, as Visa reported in its latest quarterly update. "In the U.S., we are actually back to our pre-pandemic growth trajectory, with debit significantly outpacing pre-pandemic volumes and offsetting credit underperformance," Vasant Prabhu, Vice Chairman and CFO, Visa, told investors. So, how exactly has this move to debit taken shape – and how will it continue to unfold?
Migration to cashless
"Debit has been growing rapidly through this pandemic," confirms Dan Sanford. He sees multiple factors at play here; among them, a perception of cash as "unhygienic," with some merchants not accepting it temporarily, and the increasing acceleration of tap to pay. "We have talked for a number of years at Visa about how tap to pay is really impacting cash usage, as we have been on this migration to contactless card payments," he says. "That was a phenomenon that we were already seeing around the world before the pandemic. Then, with COVID-19, tap to pay became front and center in consumers’ minds – they didn’t want to have to touch anything.
With more than 300 million contactless cards1 now in the U.S., debit rather than credit is reaping the benefit because it is the closest proxy to cash – with both, you are spending money you already have, he explains. In tandem, the increase of online shopping in response to concerns and restrictions around COVID-19 has also fueled debit usage – "and the reason is as simple as, you can't pay with cash online," says Sanford.