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This 3rd edition of Debit Cards in the U.S. continues the story told in Packaged Facts' May 2006 analysis of this market. The most notable ongoing feature of this market is its astronomical growth- Packaged Facts estimates that transaction volume doubled between 2003 and 2007, and dollar volume escalated at a compound annual growth rate (CAGR) of 20%.

The battle between issuers and merchants persists over online, or PIN, debit (preferred by merchants) and offline, or signature debit (preferred by issuers), as do the interchange wars. As predicted, rewards programs are driving market growth, debit fraud is on the rise, and younger consumers and prepaid debit are key elements in issuers' growth strategies.

The market remains dynamic, and much has transpired in the past two years. Most dramatically, Capital One has turned the industry upside-down with its "decoupled debit" program, which enables merchants to issue co-branded cards linked to a customer's current bank account. This has significant advantages for consumers and merchants, but significant disadvantages for banks, who stand to lose interchange revenues. Retailers are also turning to other alternative payment networks to bypass interchange.

Other notable events include the Federal government's elimination of the receipt requirement for small debit purchases, which is sure to spur activity; advances in the burgeoning micropayments, mobile payments, and PINless debit segments; more targeted rewards programs that distinguish different consumer segments; and the role of biometrics in fraud protection.

Report Methodology
Total volume for the debit market includes purchase volume, payments, volume, and cash transactions as described above. For the purposes of this report, Packaged Facts is concerned almost exclusively with debit transactions that involve a merchant or other third party, including in-store and online purchases as well as utility and other bill payments. Transaction volume is the primary measurement of market size and share, since it generally provides a clue to interchange and other profits reaped by issuers and processors; but because issuers are lobbying consumers to use debit for even tiny purchases, the raw number of debit transactions is also tracked as a secondary signifier of market size and growth. Packaged Facts estimates were derived from a variety of sources, including overall market data and figures for the top debit card issuers, electronic transaction data from the U.S. Federal Reserve, company annual reports and financial statements, interviews with industry analysts, and other trends and figures reported by the trade press.

Packaged Facts' analysis of consumer behavior and demographics derives from the Simmons Market Research Bureau's (New York, NY) Spring 2007 adult consumer survey, which is based on approximately 25,000 respondents age 18 or over, and BIGresearch's (Worthington, OH) Consumer Intentions and Actions data, which are based on online monthly surveys of over 8,000 U.S. adults.

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