Debit card issuers predict 7% transaction growth both for PIN- and signature-debit this year, according to the Pulse electronic funds transfer network's 2009 Debit Issuer study.

"Debit card use is expected to continue to grow as the economy bottoms out and begins to recover because consumers use their debit cards for a large portion of necessary everyday expenses," Cindy Ballard, Pulse executive vice president, says in a statement.

New York-based management-consulting firm Oliver Wyman surveyed 73 financial institutions for Houston-based Pulse, which is owned by Discover Financial Services. Together, the participants issue 94 million debit cards and operate 61,000 ATMs. The financial institutions, which include large banks, community banks and credit unions, experienced 8% overall transaction growth in their debit card programs between July and December 2008.

PIN-debit transaction volume grew 15%,
while signature-debit volume grew by 4%.

One large bank attributed the growth to greater consumer confidence in the economy during that period, according to the report. Consumers continue to prefer to use debit cards for small-ticket purchases, the study found. Twenty-seven percent of all debit purchases last year were for less than $10. "We've seen a shift from higher-value merchant categories like casual dining to groceries, which have lower tickets," a large bank says in the report.

Debit card penetration, which the report defines as the percentage of eligible account holders who have a debit card, was 73% in 2008, that same as 2007. "Best-in-class" issuers had an average penetration rate of 91%. Instant debit card issuing at branches may help improve card penetration and active rates, the report suggests. Financial institutions continue to use multiple definitions of an active debit cards. The number of issued cards used "actively" in 2008 was 66.1% under the expanded definition of active cards-those used to conduct any transaction in the previous 30 days. Earlier studies defined active cards as those used to make any signature-debit purchases during the previous 30 days. Under that definition, debit card active rates declined to 56% last year from 59% in 2007.

Source: CardForum