2016 Payments Trends – Electronic push payments start to stem the rise in debit cards

The third item on the list of trends for 2016 is the changing means of customer purchases. 

The third item on the list of trends for 2016 is the changing means of customer purchases.

Over the last few years, debit card transactions have increased significantly, overtaking cash by volume of payments in 2015. This has been in part driven by the adoption of card payment terminals by smaller merchants and the move to contactless and mobile payments in 2015. People want an easier experience when paying and are happier to use their smartphones to pay for goods.

Last year, interchange fees on card payments were capped at 0.3% for credit cards and 0.2% for debit cards. This has meant cheaper costs for merchants of card payments for higher value transactions. Against this background merchants are likely to be looking to get a better deal on lower value transactions. Historically in Germany merchants grouped together to create the Elektronisches Lastschriftverfahren (ELV) scheme which makes a direct debit payment at point of sale. With automated clearinghouse (ACH) costs being significantly lower than card payments, merchants’ profits improved.Blog3

The widespread adoption of mobile devices means people are now empowered to make push payments from their bank accounts. Over the last few years, we have seen an increase in the number of mobile apps backed by bank accounts as opposed to, or in addition to, payment cards. This is low friction for the customer and low cost for the merchant.

These services, such as iDEAL in the Netherlands, Sofort and MyBank across the EU, Pingit and Zapp in the UK, can save money on payment transaction fees for merchants and may increasingly be attractive for lower-value payments. In Denmark, MobilePay[1] from Danske Bank has been very popular with over 2.7 million clients and a peak of almost 532,000 transactions per day at the end of 20151. This system uses both bank and card accounts and represents the kind of revolution in purchasing, both in-store and in-app, that will significantly affect the payments landscape.

Debit card transaction volumes have risen steadily over the past 10 years but as ease of use becomes critical we foresee this growth will slow and may reverse. Consumers are in control of if and when this happens.

[1] http://www.mobilepay.dk/da-dk/pages/The-story-in-English.aspx