PIN Debit Transactions Will Exceed Signature Debit by 2009; Commercial Card End-User Spending Will Triple

Financial Insights: US. Examines the growth over the next four years in spending on all types of general purpose cards and provides a forecast of credit and debit card transactions and spending in the United States from 2005 to 2009. Both consumer and commercial transactions are included in this study.

U.S. Commercial Credit and Debit Card Spending Share by Brand, 2004 and 2009

Figure 1

Source: Financial Insights, 2005

Porecasts strong growth over the next five years in spending on all types of general purpose cards, but this growth will not be equally distributed. Premium brands such as American Express will grow more quickly, as will cards that offer merchants a lower transaction cost, in particular PIN debit cards.

In fact, PIN debit cards are forecast to overtake signature debit cards in total transaction volume by the end of 2009. These changes are being driven in part by legal pressures weighing on Visa and MasterCard that are likely to force down interchange, making PIN debit more attractive for issuers relative to signature debit and leveling the playing field between the large association-branded cards, such as Visa and MasterCard, and the premium or niche brands, such as American Express or Discover.

On the commercial side, American Express has heretofore been the dominant provider, but both Visa and MasterCard will increase their share of the market at its expense, as shown in the Figure. This reflects the strides that both card associations have made in improving the attractiveness of their commercial card products to businesses as well as the growing business acceptance of cards as a viable payment option. It is not so much a showing of weakness by American Express as it is a showing that the market has become truly competitive. Dealing with the rapidly changing card market will require more flexible strategies from card issuers and acquirers, as well as more flexible technology to back up these strategies.

U.S. General Purpose Card 2005-2009 Spending Forecast and Analysis, Publ 20051221