US consumers favor major credit cards for online purchases by a wide margin, but debit cards are growing in popularity, according to a recent study by Javelin Strategy & Research.
Seven in 10 Consumers Use Major Credit Cards Online
“Online Retail Payments Forecast 2010-2014” indicates that 70% of US consumers used a major credit card to make an online purchase during 2009. The only other two options used by more than 50% of respondents were major debit cards (55%) and an online payment service such as PayPal or Google Checkout (51%). The next-most-popular method, gift card, was used by 41% of respondents. Store-branded credit and debit cards each had usage rates of less than 30%.
Debit Card Growth Appears Strong
Although their popularity still trails credit cards in both the major and store-brand categories by a significant margin, debit cards appear poised for strong growth in the next four years. Debit cards’ actual share of online purchases grew from 26 to 28% from 2008-2009, and is projected to remain essentially flat through 2014.
However, debit card purchase volume rose 21.3% between 2008 and 2009, from $47 billion USD to $57 billion USD. From its 2008 level, debit card purchase volume is expected to increase 42.5% to $67 billion USD, by the end of 2010. Looking out to projections for 2014, debit card purchase volume is expected to grow 123.4% from its 2008 level to $105 billion USD.
Javelin cites consumers seeking to control spending and needing an alternative to denied, canceled or maxed out credit cards as driving debit card growth in the past two years. Looking forward, Javelin predicts debit card growth will continue growing at a rapid pace through 2011, then start slowing down as credit finally loosens. According to Javelin, both credit cards and debit cards will experience a compound annual growth rate (CAGR) for online purchase volume of 13% between 2009 and 2014.
Other Findings
- One-third of consumers who use non-traditional forms of online payment are driven by security concerns including general protection from fraud and misuse of personal information (19%) and ability to keep their identity private (14%).
- Sixty-three percent of consumers are comfortable making an online purchase.
- Twenty-two percent of consumers have never made an online purchase or have not made one in the past 12 months.
Credit Card Popularity Drops
One in 10 Americans has given up or lost the use of credit cards in the past eight months, according to a new CreditCards.com poll. This number includes both consumers who have voluntarily given up credit cards and those who have had their cards involuntarily shut down due to poor credit.
Twenty-nine percent of poll respondents reported that they do not have a credit card in February 2010. This is a 52.6% increase from the 19% of consumers who did not have a credit card in June 2009.
