tilled logo

Tilled’s Take: What’s Driving The Acceleration of Payment Digitization?

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

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 of 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 digitize their 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!


More articles.

What Stripe’s Recent Price Hike Actually Means For Merchants

With Stripe’s new price increase officially in effect, we’ve got everything you need to know at our latest blog. As Stripe has warned for the last few months, their pricing for manually entered credit card transactions has INCREASED by 0.5% . This means that if you are keying in payments manually into Stripe, your cost […]

Read More

Tilled’s Take: Succeeding in the Mid-Market Requires Purpose-Built Software

With talks of providers like Stripe and Adyen eyeing the mid-market, software companies can rely on Tilled’s PayFac-as-a-Service to deliver a payment solution made for their growing businesses. The payments industry is no stranger to change. Every other week it seems like there’s a new way to pay, another player introduced to the ecosystem, or […]

Read More

Why You’ll Love White-Labeling Your Tilled Platform

There’s no need to google “white-labeling” BTW, we’ve got that — and why you should care — totally covered. We’ll get straight to answering your burning question of “what is white-labeling?” At Tilled, we define white-labeling as the ability for a partner or ISV to customize elements of the Tilled merchant experience with their own […]

Read More

Is your data portable?

One important question that every B2B software company should be asking before deciding on a payments partner is, is your data portable? And by that we mean, what happens if, for any reason known or unknown, at some point you decide to leave your current payment processor and move to another platform, can you bring […]

Read More