The payments landscape has evolved significantly in recent years, with regulatory changes and technological advances creating a number of interesting dynamics that affect a consumer’s choice of spending vehicle.
For starters, the Durbin Amendment robbed banks of $8.4 billion in annual revenue by capping debit card swipe fees. Banks have, in turn, eliminated most of their debit card rewards programs and emphasized unregulated products like prepaid cards – which accounted for 10.5% of all card payments in 2018, according to the Federal Reserve. They’ve also deemphasized brick-and-mortar branches in favor of less-costly online accounts.
The credit card market has undergone a great deal of upheaval as well, with underhanded, predatory issuer practices necessitating the passage of significant pro-consumer legislation: the Credit CARD Act of 2009. Issuers have since focused most of their efforts on attracting consumers with above-average credit standing, creating something of a competition vacuum at the low end of the credit spectrum.
What results in an environment in which consumers are exploring a number of different options to meet their spending, payment, and everyday banking needs. As such, debit and prepaid card market penetrating reveals a great deal about consumer habits and the payment industry’s hierarchy.
U.S. Debit Card Circulation
- 85% of U.S. adults have at least one debit card (across all age groups, income brackets, and education levels).
(Source: Research and Markets, 2022 U.S. Consumer Payment Choice: Understanding Debit Card User Preference)
- 57% of total payments in 2021 were made with credit cards and debit cards.
(Source: Federal Reserve Bank, “Diary of Consumer Payment Choice”, 2022)
- In 2020, consumers made majority of their payments with debit cards, followed by credit cards and cash.
(Source: Federal Reserve Bank of Atlanta, “Consumer Payment Choice”, 2020)
Market Share of U.S. Debit Card by Purchase Volume
Amount Loaded Onto U.S. Prepaid Cards by Year
Historic and Projected Amount Loaded Onto U.S. Prepaid Cards by Year
|Total (in Billions)||$1645.77||$889.25||$897.00||$658.65||$641.85||$558.96||$561.30|
|Change from Prior Yr.||85.07%||-0.86%||36.19%||2.62%||14.83%||-0.42%||N/A|
- The U.S. prepaid card market is expected to reach $1,645.77 billion by 2027 (up from $658.65 billion in 2022).
(Source: GlobeNewswire, United States Prepaid Cards Market Report 2022)
- The share of prepaid debit card payments dropped to 10.5% in 2018, compared to 11.1% in 2015.
(Source: Federal Reserve Payment Study, 2019)