Visa Data Show Increasing Penetration of Sub-$25 Market

Visa USA reported Thursday an increasing willingness among consumers to use cards for purchases valued at under $25, a highly coveted transaction segment in which the San Francisco-based bank card network waives its signature requirement in some 17 merchant categories. The network says its payment volume in this segment jumped 17% in the first half of 2006 as compared to the year-ago period, to $27.3 billion. Of this volume, 78% came from signature-debit cards, Visa says. The sub-$25 market, and in particular the sub-$5 micropayment piece of that market, is one processors have pursued aggressively over the past several years in an effort to boost revenues by converting what are traditionally cash transactions to electronic payments. In addition, Visa along with MasterCard Worldwide and American Express Co. have pursued this market with new technology?called contactless payment?that allows cardholders to pay by waving a card or other token near a transceiver at the point of sale. Visa says a survey it conducted in July of 1,154 credit and debit card holders reveals that 55% use cards for transactions under $25. Among the respondents, 60% of those aged 18 to 25 use cards for sub-$25 goods. Items purchased range from physical-world goods like parking, cans of soda, cups of coffee, and newspapers to online fare such as songs and games. Some 70% of this young age group also show a willingness to use cards to buy physical and online goods that cost under $2?items Visa calls micropriced?while just 26% those 45 and older are likewise inclined. In the past three months, 35% of the 18-to-25 group have used a card to buy a cup of coffee or tea, while 22% have bought digital content with their plastic. Top places where this group would like to see expanded card acceptance are vending machines, road-and-bridge tolls, parking, taxis, and public transit, according to the survey. The younger crowd relies more heavily on signature-debit cards than older respondents, with 44% reporting they use debit primarily for small-value purchases, while 33% of those over 45 do. Visa earlier this year introduced a two-pronged strategy that includes expanded incentives to convert small-value transactions to cards (Digital Transactions News, April 13). In some 17 cash-intensive merchant categories? parking, car washes, drug stores, fast food, so-called miscellaneous food stores, and gas stations among them?the association waives its signature requirement on purchases under $25. In addition, in 14 categories, Visa offers reduced interchange fees for consumer transactions under $15. All 14 are included among the no-signature group. Those not included are drug stores, miscellaneous food stores, and gas stations. Visa's survey, conducted July 24-27, involved an online poll of adult Americans who have a credit or debit card. The margin of error is no more than plus or minus 3 percentage points at the 95% confidence level.