DENVER -- When it comes to paying for goods and services, consumers want and expect a choice of payment methods at the point-of-sale (POS), according to a recent survey released by First Data Corp.
The STAR Consumer Payments Usage Study, conducted by an independent research firm, found that consumers reported using two to four payment types monthly, indicating that multiple payment types are favored based on individual preferences at the POS.
This year's study makes it clear that offering a variety of electronic payment options [image-nocss] can help retailers and financial institutions win new customers, increase revenue and enhance customer retention, said Debra Janssen, president of First Data Debit Services. It's important for companies to support various types of secure electronic transactionfrom PIN-secured debit to credit to check electronificationto provide comprehensive payment solutions for clients.
The 2004 survey data also points to the continued growth of electronic payments at the POS. Nearly half of consumers surveyed (47%) prefer the PIN-secured method, compared to 30% who prefer the signature-based method. Survey respondents largely cite increased security as the number one reason for choosing to use their PIN numbers to make purchases (46%).
More than five out of every six ATM/debit cardholders surveyed had used their ATM/debit card at an ATM or at the POS at least once in the 30 days prior to the survey. In addition to debit, whose popularity is especially strong among cardholders between the ages of 21 and 54, consumers continue to use other electronic payments options regularly, as well.
Some 29% of nondebit users surveyed say credit cards are their preferred means of payments, up 11% over 2003. Debit users are the least likely to pay with check, while nonusers still report that they wrote an average of three checks per month at retail.
Our research shows that consumers prefer to make PIN-secured payments at the POS. STAR is addressing this preference by working with merchants to PIN-enable new types of retail outlets such as quick service restaurants, movie theaters, newspaper stands, laundries and parking facilities, added Janssen. By offering a comprehensive electronic payments solution to our customers, financial institutions and retailers of all sizes can offer choice to their customers.
The survey, directed by Applied Management & Planning Group, was conducted in 35 states and includes data from nearly 13,000 respondents. The error rate for the survey was plus or minus 1% at the 95% confidence level.
2005 STAR Consumer Payments Usage Study Key Findings
PIN-Secured Debit Preferred by Consumers, Good for Retailers:Nearly half of consumers (47%) surveyed prefer the PIN-secured method, compared to 30% who prefer the signature-based method. Respondents largely cite increased security as the number one reason for choosing to use their PIN numbers to make purchases (46%).Those consumers who use both PIN-secured and signature debit, nearly 6 out of 10 consumers, reported that they use their cards more on average, 21.4 times per month. This is far more than those consumers who use only one type of debit. Those who use only signature debit say they use their cards 13.4 times per month and those who use PIN-secured debit only report using their cards 9.0 times per month.An increase in debit card use at the POS is good news for retailers. When consumers use their debit cards, they spend more. In fact, debit purchases are 32% higher compared to cash and 24% higher compared to checks. Grocery stores, gas stations and specialty retail locations are the most likely to benefit, as they are the most popular outlets for PIN-secured debit payments.
Loyalty and Technology are Key for Financial Institutions:Identity theft and fraud continue to be a concern for consumers. One-quarter of consumers surveyed, regardless of ATM and card usage habits, say they are extremely concerned about their exposure to fraud and their personal safety when using an ATM. Overall, less than one-fifth of debit card users surveyed are aware of zero liability from any type of debit card losses; however, when asked about personal liability and exposure to fraudulent purchases, consumers were equally likely to expect zero liability from signature debit and PIN-secured debit purchases. Financial institutions have an opportunity to better educate their cardholders about the protective features of their cards.An opportunity also exists with loyalty programs. While the number of programs is growing, more can be done to make consumers aware of reward programs available. Just 17% of respondents knew of a POS-based rewards program offered by their financial institution. However, once aware, nearly half (46%) enroll, indicating that financial institutions may realize significant benefit by better educating their customers about their loyalty offerings. Customized communications are key to strengthening the issuer-cardholder relationship.New technology services can also be a customer retention tool, as consumers say they appreciate being able to do banking at home. Online bill payment continues to grow with 32% of consumers surveyed reported paying bills online, an increase from last year's 27%. And, survey respondents rank the ability to do banking transactions, transfer funds and review statements from a home computer (5.7) as the most appealing technology being offered by their financial institution. The opportunity also exists to transform traditional communications methods into interactive relationship-building tools.
Gift Card Usage on the RiseConsumer usage of store gift cards and prepaid cash cards is on the rise. More than one-third of consumers surveyed indicated their use of a store-specific gift card to make a purchase in the past 12 months (40%) and nearly 20% of consumers have used a prepaid cash card. Significantly more respondents have used a prepaid cash card and a store gift card in 2004, both increasing by at least four-percentage points over 2003. Two-thirds of respondents reported they received the card as a gift (67% who used a prepaid cash card and 80% who used a store gift card). Similar to stored value cards used, 39% of consumers surveyed have purchased a store-specific gift card in the past 12 months and 23% had bought a prepaid cash card, significant increases from the previous year's 37% and 19%.