P2P Payments, Card-Not-Present Drive 2019 Growth in Debit Transactions

Even before consumers’ acceleration to online shopping due to the pandemic, card-not-present debit transactions rose 21% year-on-year in 2019, according to Pulse’s debit issuer survey released today. Account-to-account debit transfers, a CNP transaction type that includes P2P payments like Zelle and Venmo, doubled from 2018 to 2019 and accounted for 40% of total debit transaction growth.

“Card-not-present transactions already represent 27% of all debit transactions and are growing about 10 times faster than card-present transactions,” said Tony Hayes of Oliver Wyman, which conducted the study for Pulse. “That growth will surely accelerate due to a surge in e-commerce, and a shift in many traditional card-present merchant categories, such as grocery and restaurants, to remote card-not-present ordering.” Debit activity in the wake of the coronavirus pandemic surged in early March as consumers stocked up on supplies, dropped by as much as 30% in mid-March as lockdown orders were imposed and rebounded partially in April and May as economic impact payments reached consumers.

Overall, Americans conducted 77.5 billion debit transactions in 2019, a 6.5% rise from the year before. The average net fraud loss per debit transaction edged up from 1.1 cents to 1.2 cents. Debit interchange accounted for 6% of non-interest income across financial institutions, making up 5% at nationwide banks, 8% at regional banks and 24% at community banks, said Pulse, a Discover company. (ABA endorses the signature debit product offered by Discover.)

Nearly three in 10 issuers deployed contactless cards in 2019—up from 10% in 2018—and 66% projected that they would offer contactless debit cards by the end of 2020. Transactions using mobile wallets nearly doubled but accounted for just 1.7% of all debit transactions, with Apple Pay accounting for 85% of these payments, Pulse found.