While consumers have used debit cards to make purchases for more than a decade, many financial institutions have placed a lower priority on their debit card business following regulatory changes, according to a white paper from FIS.
After rapid annual growth during the past decade, debit card growth has plateaued for many institutions in the last year or two, reports “The Case for Promoting Debit Cards: Why They Are Still a Growth Product.”
Debit card use grew from 8.3 billion transactions in 2000 to 46.7 billion in 2011—average annual growth of about 19%, according to the Federal Reserve Board and CEB Tower-Group. There was a corresponding growth in debit volume from $300 billion in 2000 to $1.8 trillion in 2011, roughly a 20% annual growth rate.
But this slowed to 0.5% during the first nine months of 2012, according to Visa and MasterCard statistics.
Still, the report advises financial institutions to promote debit. Here’s why:
Financial institutions with assets of less than $10 billion typically generate 1.1% in interchange fees for every dollar spent with a debit card (based on a blended rate for signature-based and personal identification number based debit transactions).
A financial institution with 10 branches will see about $70 million per year in debit card volume, according to FIS. Growing that volume to $80 million will result in $110,000 in additional interchange fee revenue, based on the 1.1% generated from interchange.