Study Shows Consumer Preference for PIN Debit

A major study on consumer payment preferences at the point of sale released today shows not only a stronger trend toward debit cards generally but also a stronger preference for cards secured by personal identification numbers rather than by signatures. This is despite strong promotion from the major card companies trumpeting the benefits of signature-based, or offline, debit as an alternative to PIN debit. In the study, conducted by Boston-based Dove Consulting, 45% of consumers preferred to enter a PIN, compared to 38% preferring to sign for their transactions. The remaining 17% expressed no preference. “Incremental deployments of PIN pad terminals at major retail chains will support the continued growth of PIN debit,” says Dove in the study. The study's other major findings included a strong preference for debit over credit, cash, and checks generally. Debit cards now account for 31% of in-store payments, the study shows, compared to 21% for credit cards and 47% for cash and checks. The corresponding numbers in a similar Dove study only two years ago were: 26%, 21%, and 51%. Taken together, credit and debit now account for better than half of all point-of-sale transactions, but with the share controlled by credit cards remaining unchanged for the last few years. The stronger preference for PIN debit than for signature debit comes in the face of heavy promotion by the card companies of their signature-based debit products, on which issuers generally earn higher interchange than on transactions secured by PINs. Visa, for example, designated November as “Know Your Check Card Month” in a major consumer promotion of its signature-based debit card. Touted especially in the promotion were the benefits of using a check card rather than a PIN-based debit card, such as so-called zero fraud liability, which issuers may not offer on PIN debit. At the same time, both card companies introduced lower interim interchange rates for offline debit in August in the wake of last spring's settlement of the Wal-Mart class-action case, and Visa last week announced new, permanent rates set to go into effect Jan. 31 that are lower across the board than its presettlement pricing. To collect its data for the consumer-preference study, Dove sent surveys to consumers across the country. A total of 2,008 consumers returned completed questionnaires, a sample Dove says is “representative of the overall population.” The consulting firm conducted the same survey in 2001 and in 1999.