Debit cards remain top consumer payment choice, even as digital wallets gain

Consumers continue to warm up to using a digital wallet for payments. But even with those numbers on the rise, the physical debit card still rules when it comes to overall utilization and customer satisfaction, new data shows.

Still, the trends are clear: digital wallets are on the rise and within the wallet, the debit card begins to lose its brand affiliation.

Just over 70% of customers surveyed say they use a debit card at the point of sale, either by tapping, dipping or swiping their card in person or entering their account number online or in a mobile app, according to the J.D. Power 2024 Debit Card Satisfaction Study.

That’s higher than all other payment methods, including cash, credit cards and digital wallets. Debit cards also have the highest proportion (68%) of customers with a favorable impression of the payment method when compared with other forms of payment, such as credit cards, digital wallets and buy now pay later (BNPL), the findings show. The survey included 7,756 responses and was conducted from September through November of 2023.

Customers under 40 years old continue to be the most likely users of debit cards (82%) and most likely to have a favorable view of debit cards (77%). Debit card providers that perform particularly well in the under-40 segment, according to this report, included Capital One, Chase and U.S. Bank.

“Consumers have plenty of options when it comes to payment method and yet they prefer debit over most others,” says Sean Gelles, senior director, payments intelligence, with J.D. Power.

“Our latest study shows a 6-point drop in point-of-sale usage compared to the prior year, but that doesn’t necessarily translate into less debit card spend for issuers given the increasing prominence of debit cards in digital wallets,” Gelles added.

Reimagining value-add with debit cards

Given the trend, analysts do expect less physical card use and fewer instances of manually typing in account numbers in the future as digital wallet use becomes more ubiquitous, as predicted.

The more pressing question facing debit card issuers is how to maintain brand presence when their debit cards are increasingly hidden behind the digital wallet brand in the point-of-sale payment experience.

The risk for issuers is that customer affinity with their brand will likely take a hit as more shoppers associate transactions with tech-backed wallet provider (for instance, Apple) instead of the card issuer. Consumers tend to associate the ease of use and positive connotations they feel with the technology behind the wallet, not the debit card.

“If they don’t get a handle on this, issuers may face trouble down the line,” says Gelles.

Issuers will have to find new ways to make themselves indispensable to the customer, possibly by focusing on value-added experiences related to budgeting, security or rewards, all of which have strong influence on debit card user satisfaction when delivered well, the J.D. Power report suggests.

As one example, Early Warning’s new Paze digital wallet represents a strategy for overcoming the challenge by enabling the participating debit card issuing banks to retain brand relevance and the customer relationship within the digital wallets ecosystem.

Issuers that offer Paze and encourage their active debit card users to enroll should benefit most from a combination of continued spend and brand recognition.

Top issuers scored high on fees and security

Meanwhile, there are other distinctions across debit cards that influenced the consumer response. Fees and security were two of the biggest contributors to what was a wide range of satisfaction within the results.

Notably, there is an 85-point (on a 1,000-point scale) difference between the top- and bottom-ranked debit-card issuers. Scores are most influenced by customer opinions about the reasonableness of fees and services charges and purchase limits.

Security is also critically important to debit card users. Issuers whose customers say they keep them completely informed about security policies/protections receive the greatest boost in overall performance. BMO, Capital One, Citi and Huntington all deliver strong results in the security dimension, according to the J.D. Power results.

Rachel Koning Beals is Senior Editor at BAI.