According to figures released by the payments council at the beginning of 2011, debit card expenditures more or less matched cash expenditures for the first time ever in the UK (and are expected to outstrip it easily in 2011). According to the statistics, there were around 6 billion purchases made using debit cards in the UK during the previous 12 months, an annual rise of nearly 9% and these transactions were worth a combined £265 billion, at an average value of £44 (up 7.5% overall). Yet while there were the much greater 21.4 billion cash transactions made in that same period (which was nonetheless down by 5.2%), the total value of these payments fell by 0.4% to about the same £265 billion figure.
Now clearly, these figures do not mean that cash is disappearing any time soon, especially since these lower average expenditures of £12 or less are often most conveniently settled by cash. However, it does signal that a lot of non-retail spending in particular is shifting to debit card use (and even some retail too with the interest in payment using NFC technology and smart phones in the near future) and perhaps the greatest area in which this likely to be significant is in paying bills (especially those sent from Government or Business to consumers).
What is driving this trend is that cheque writing is falling steadily (and of course is planned to disappear by 2018 in the UK). In fact, over 100 million fewer cheques were written in the UK in 2010 by consumers and it is the debit card that seems to be the preferred alternative, rather than the credit card. In 2010, credit cards accounted for £125.4 billion worth of payments, an annual fall of 0.7%, with 2 billion separate purchases (making an average credit card transaction £63). Hence, debit card transactions outnumbered credit card payments by three to one and represented more than twice the overall spend.
So what does all of this change mean for organisations on how they currently do business? Well first and foremost, accepting payment by debit card becomes pretty critical. Many small businesses (and even a few medium to large ones) do not at the moment and may well lose customers to competitors in the future. Beyond this perhaps obvious issue is the fact in the modern world people are happy to save as much time as they can and a debit card can often meet this need for faster transaction time and greater convenience (especially when paying over the web).
The benefits of accepting, and even encouraging debit card payments are many for the organisation and include:
•Less trips to the bank (with cash and/or cheques)
•Greater security (with less cash and cheques to keep safe)
•Extended opening hours for payment (allowing customers to pay by telephone or over the Internet 24/7 and 365 days a year-an outcome that can be set up immediately with a relationship with a web billing and payment portal such as PaySwyft.
•A faster transfer of funds to the organisation’s bank account than most other methods
•Generally cheaper than handling cash or credit cards
•Typically much lower charge-back risks than with credit cards
Each of the above is probably compelling reason enough for any business to take debit card payments, but in combination and given this payment type’s rapidly increasing popularity amongst consumers, the decision becomes extremely compelling in today’s fast-moving commercial climate.
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