Tilled’s Take: What’s Driving The Acceleration to Monetize Digital Payments?

Debit card usage has topped that of credit cards — a first for the payments industry — and we’re sharing our two cents on monetizing digital payments.  

Have you heard? Debit cards are the new credit cards — at least for now. 

According to an article by Digital Transactions, the number of people who prefer to use debit cards has recently surpassed those that favor credit, “Through the second quarter of 2022, 56.2% of consumers preferred debit as their primary payment card, compared to 39.5% for credit… Those numbers represent a dramatic change in the payments landscape, as just 40.2% of consumers cited debit as their primary payment card as recently as last year, compared to 54.6% for credit.” Those are some really notable stats, so let’s talk about what this means and why it may be happening.

There’s no question why debit cards are attractive to consumers. With zero interest and little to no fees, debit cards make it easy for consumers to limit the danger of racking up debt. Sure, there’s no point system or cash-back benefits like with credit cards, but the ability to track funds in real-time and avoid overspending can keep consumers in a healthy place financially.

Yet, in the current macroeconomic environment, it comes as a surprise that debit cards are taking over. In a recessionary period, you typically see higher credit card usage. That said, we’re also seeing a major shift away from cash, which we can assume accounts for the uptick in debit card usage. Since the pandemic, the number of transactions completed in cash have dropped dramatically, this Atlanta Fed survey shows cash payments declining to 18.6% of transactions, compared to 25.8% in 2019.

PewResearch also reports that “Adults under 50 are less likely than those ages 50 and older to say they try to always have cash on hand (45% vs. 71%). And just over half of adults younger than 50 (54%) say they don’t worry much about whether or not they have cash on them, compared with 28% of those 50 and older.” 

So, what does this tell us? We know that adults under 50 are less likely to pay for transactions with cash than adults over 50, and we know that debit card adoption is increasing due in part to the shift away from cash. Keeping this in mind, we can deduce that the younger generations are driving the acceleration to monetize digital payments. 

Ultimately, the spike in consumer debit card usage speaks to the resiliency of consumer spending. Despite the current fluctuating market, inflation and rising prices, consumers continue to complete purchases. This trend is going to be an interesting one to watch too, especially as the younger generations begin to mature financially. As for whether or not the days of cash resurface and how long debit usage will top that of credit… we’ll just have to wait and see.

 

Tilled plays a part, too!

Here at Tilled, we’ve been expecting the digitization of payments and are thrilled to be a part of it. Through our integrated PayFac-as-a-Service solution, Tilled is helping other software companies monetize digital payments AND empower them to generate revenue from the payments they accept. To get started with integrated payments, reach out to our sales team to learn more!