First Data Corp., which processes about half of all U.S. card spending, recently identified a trend: debit spending again overtook that of credit cards in a pattern that crisscrossed over the previous 18 months.
Now another trend is emerging: PIN-debit use is growing much faster than signature debit and credit, according to data from the Atlanta-based processor.
In last year's fourth quarter, the combined signature debit and credit volume processed through First Data grew by about 3.1% year over year, compared with about 2.7% for PIN-debit. But during this year's first quarter, PIN-debit volume jumped by about 8.2%, compared with about 5.2% for credit and signature debit.
And in the second quarter, First Data reported about 6.4% growth for PIN-debit volume, compared to 2.7% for signature-based debit and credit.
Before August 2011, the share between PIN and signature debit for the previous 18 months had been pretty stable. But in September, PIN debit began to take share away from signature debit, and that momentum continues to grow.
The effect of the debit-interchange rate cap under the Durbin amendment might be a factor, Rikard Bandebo, an economist and a First Data vice president, said in an interview.
Merchants, especially larger retailers, are devoting more attention to analyzing their payments and routing them more judiciously by steering customers to use their PINs, he said. Issuers, meanwhile, have ended the rewards programs they used to steer customers toward signature payments.
"There is a consumer preference for PIN. It's always been there," Bandebo said.
As for the market share shift to debit card use over credit cards, the exact cause remains a mystery, Bandebo said.
"Durbin may have explained the shift from debit to credit (last year) because of the taking away of debit rewards, but it doesn't say why it went back," he said. "There's still a 'dark matter' out there."
And Bandebo continues to investigate the cause. In a lot of categories, the card choice is based on the size of transaction. "Most of what's driving this is the average size of the ticket in most industries," he said.
Bandebo noted the shift during a presentation at SourceMedia's Card Forum & Expo in May. SourceMedia publishes PaymentsSource.
At first, Bandebo theorized the shift might have related only to certain spending categories. But it didn't.
"The pattern held true across all of them; even travel saw a shift from debit to credit and back again," Bandebo said.
Ticket size plays a role, especially for discretionary or unusual purchases, Bandebo said. For auto maintenance, most consumers would use a debit card to buy a new set of wiper blades — and the same consumers would use a credit card to pay for a new transmission.
With budgeted expenses, such as buying groceries, consumers will stick with their usual buying patterns, Bandebo said. Whatever card they have or generally prefer to use, they use it, regardless of the ticket size, he said.
Credit might again overtake debit in spending share, Bandebo said.
"It may about shift again or flatten out," he said. "We'll have to wait and see how that plays out."