Millions of consumers have changed their purchasing habits significantly since the recent recession, and part of that shift in behavior has led to a surge in use of both debit and credit cards, instead of cash.
While cash remains the most popular purchasing method overall, that is no longer the case when it comes to in-store retail purchases, according to new data from Javelin Strategy and Research. Debit and credit are now the most used purchasing methods when it comes to point of sale retail purchases, with debit coming in first and credit lagging only slightly behind. It's expected that these payment methods will continue to increase their share of this type of purchasing in the near future over traditional methods such as cash and check.
Further, credit card use will likely catch up to debit purchases by the end of 2017, though this will also be due to the continual economic recovery seen nationwide, the report said. The type of payment methods consumers employ at retail point of sale locations is particularly important going forward because of the sheer volume spent annually. Real-world sales total roughly $3.8 trillion annually, and make up about 96 percent of total retail market in the U.S.
There are likely two types of purchasing platforms that will lead this charge over the next five years, the report said. The first is mobile phone payments, which will likely increase to a value of about $1.4 billion annually through the end of 2017, up from this year's projected total of about $365 million. More companies are now rolling out these platforms and many experts believe they will gain ubiquity over the next few years.
The other payment method that has gained significant traction in the last few years and will likely continue to do so is prepaid cards, the report said. These have become extremely popular with many consumers who are considered "underbanked" - that is, they are viewed as not being able to afford or qualify for traditional bank or credit card accounts.
"Financial institutions are investing in prepaid cards, which are becoming a more attractive option to consumers," said Beth Robertson, director of payments research at Javelin. "Unlike gift cards, prepaid card features and functionality have evolved to be comparable to traditional demand deposit accounts. Prepaid cards often include features like advanced account management, bill-pay capabilities and a linked savings account, providing consumers with more choices and greater flexibility."
Consumers' attitudes toward credit cards in particular have been improving in the last several months, as the economic effects of the recent recession continue to wane and more Americans get their personal finances in order. A number of recent reports have highlighted that consumers now rely on credit to make everyday purchases more often, and are trending toward pre-recession spending levels on these accounts, even as they're being more cautious about their outstanding debt.
