Pandemic powers digital debit, Apple Pay

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The shift to electronic payments during the coronavirus has led to a notable increase in in-app debit card payments—particularly via Apple Pay—along with higher levels of direct debit and P2P debit card transfers.

Debit transactions powering e-commerce and in-app purchases increased 21% year over year, 10 times the growth rate of in-store debit transactions, according to new data from Discover Financial Services’ Pulse debit network.

The pandemic is a key factor behind the sharp increase, as more home-bound consumers shift shopping online, concluded Tony Hayes, a partner at Oliver Wyman, who led the study. “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,” Hayes said in a press release.

Visa Direct and Mastercard Send, Paypal's Venmo and the bank-owned P2P service Zelle are also reaping gains from recent trends as consumers trust these channels more for everyday purchases, said Sarah Grotta, director of debit and alternative products advisory at Mercator Advisory Group.

"What we're seeing is that in the past consumers were less likely to use a debit card for e-commerce purchases out of concern for fraud and the impact of unauthorized transactions in their checking account, but now they're using debit more frequently in card-not-present channels," Grotta said.

The vast majority of debit card usage is still for face-to-face transactions. Card-present transactions account for 73% of all debit transactions, rising 2% over the past year, Pulse’s 2020 Debit Issuer Study found.

Debit payments within mobile wallets have also surged, rising 94% year over year to 1.3 transactions, according to Pulse. Apple Pay alone accounted for 85%, or 1.1 billion, of debit-powered mobile wallet transactions over the last year. The remaining 15% of mobile wallet debit transactions were divided between Samsung Pay ad Google Pay. Pulse also noted usage of contactless cards has risen significantly in the U.S. in the past year as more issuers rolled out NFC-enabled cards when existing EMV cards expired.

Oliver Wyman expects 87% of all debit cards will be contactless by the end of 2022 with coronavirus accelerating merchant acceptance as more consumers look to reduce their viral exposure by minimizing contact with surfaces, including cards and payment terminals, in stores.

Consumers used their debit cards about 25 times per month in 2019, propelled by a 3.1% rise in “transactions per active card,” Pulse said. The average debit card payment ticket size rose slightly to $40.50 from $39.70 in 2018.

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Digital payments Mobile wallets P-to-P payments Venmo Apple Pay