Some debit card users are so loyal to their cards that many would go so far as to say using a PIN is more convenient — and less secure — than a using a signature, according to a recent report from Auriemma Consulting Group.
Conventional wisdom in the payments industry runs counter to those perceptions, because PIN authentication adds a step to the payment process but also guards against stolen card fraud.
Overall, the research illustrates how popular debit cards remain, particularly with younger consumers, said Jaclyn Holmes, senior manager of payments insights for New York- and London-based Auriemma.
"People who like debit will continue to use it, mostly out of utility to prevent themselves from getting into debt, and this research further shows that," Holmes said of the study based on Web interviews with 500 debit card users in the U.S. last month.
While it is too early to determine if any consumer habits related to credit or debit card use have changed since the U.S. migration to EMV chip cards began in earnest late last year, there is no indication that debit card users are swayed by any of the latest payment technologies, Holmes said.
When using a debit card at the point of sale, 58% of cardholders said they select debit and enter a PIN to complete a transaction, while 42% chose credit and a signature to authorize. Even though research didn't show a wide disparity, 37% preferred PIN because it was more convenient, compared to 34% saying they preferred signature's convenience.
But 34% also felt signature was more secure while authorizing at the point of sale, while 29% said PIN was more secure, likely reflecting a concern that someone nearby could possibly see a PIN being entered.
Another 32% indicated signature was a better overall anti-fraud measure when compared to other payment and security methods, while 25% cited PIN as the better method.
In another category in which results have gone against common wisdom, 31% said PIN was a faster transaction process than signature, and just 24% said signature was faster.
Many merchant organizations have pushed the industry to include PIN as an extra layer of security even for credit cards with the introduction of EMV in the U.S., but most issuers have stuck with signature for the initial rollout.
The card networks have countered that PIN authentication would be a barrier for adoption.
"It was surprising that more people thought PIN was more convenient than signature, but while also feeling signature was more secure," Holmes said. "They were not major differences, but it might be a little counterintuitive."
A deeper look at the feelings of debit cardholders in these areas might be needed, Holmes admitted. "I'm not entirely sure what to think of those answers," she added.
Cardholders were asked to imagine a scenario where they needed to make a $100 purchase, but did not have the available funds. The vast majority (82%) indicated they would prefer to make the purchase on a credit card and roll over the balance, while only 17% would prefer to make the purchase with their debit card and pay overdraft fees. When looking specifically at debit cardholders who also have a credit card, that preference increases to 88%, the report said.
Conversely, debit cardholders who have overdrawn their account because a deposit took too long to clear are more likely, at 28%, than those who have not overdrawn, at 13%, to say they would prefer to make the purchase on their debit card and pay the overdraft fees.
These findings suggest that debit-preferring cardholders do not view overdraft fees as enough of a deterrent to drive them to use credit, but rather use a credit card as a solution to a low funds issue, the report said.
Such a likelihood is supported by the fact that cardholders were close to being split evenly on whether they view a declined credit card payment worse than an overdraft fee, Holmes said.
Fifty-three percent of respondents said the declined payment was worse, compared to 47% saying the overdrawn debit account and paying a fee was worse.
Decoupled debit cards, or those in which the consumer links the card to a bank account, remain a popular choice for younger consumers and those looking to earn debit rewards through higher debit usage and spend.
Slightly more than two in 10 debit cardholders, at 22%, have a decoupled debit card. One quarter of those report using the card on at least a weekly basis, while 28% said they use it at least once a month.
While the Target Redcard and Nordstrom Debit Card are decoupled debit products, the concept has generally been most prominent for consumers to use at gas stations and convenience stores.