New data has revealed six distinct consumer payment segments, according to a survey released by First Data's STAR Network.
The 2006/2007 Consumer Payments Usage and Segmentation Study includes a segmentation analysis of specific market groups based on their payment tendencies at the point of sale. The six segments found in the research include the signature debit, PIN debit, cash/PIN debit, cash, check and credit card segments. The segments — determined by an analysis of payment behavior, demographics, attitudinal characteristics, payment preference and value-based characteristics — provide a new way to look at the point of sale payments landscape.
"Segmentation is the key to capitalizing on different customer needs. Each customer segment is driven by distinct, identifiable tendencies, and an understanding of these behaviors can help financial institutions develop more effective strategies to maximize the value of customer relationships by converting cash and check payments to electronic form," said Todd Strubbe, president of First Data's debit business. "The segments also exhibit different product and communications preferences, which can be used to make targeted product packaging and marketing activities more efficient and effective."
When asked the reasons behind choosing one form of payment over another, consumers rated security as the most important attribute for any payment method, followed by control over money, fee avoidance, and ease of use.
The 2006/2007 survey data also points to the continued growth of debit activity at the point of sale. Over the past five years, consumers' average PIN-secured debit point of sale activity has grown from nine transactions per month to 11. The average total number of signature debit point of sale transactions made monthly has increased 38 percent in the last year, from 13 to 18 transactions per month.
"The debit card is clearly establishing itself as U.S. consumers' preferred payment mechanism. We've seen continued growth in transaction volume over the last several years, and the runway for debit growth continues to look good," added Strubbe. "We've also seen that consumers who use both PIN-secured and signature debit use their debit card more frequently than those who use one method exclusively. The implication for financial institutions is that promotion of both forms of debit helps increase overall transaction volume and customer satisfaction."
The majority of debit cardholders tend to use both PIN-secured and signature debit, rather than one method exclusively. Providing the option to make payments using both PIN-secured and signature debit increases the number of potential transactions those consumers make monthly, according to the survey. The study found that consumers who use both PIN-secured and signature debit at the point of sale conduct an average of 24 transactions per month versus 18 for those who solely use signature and 11 for those using only PIN. This tendency appears to be consistent year-over-year and growing, and accounts for greater usage than those who use either PIN-secured or signature debit only.
According to the survey, the debit card has the second highest preference for smaller purchases, with preference rising steeply and making it the most preferred payment method for purchases between $25 and $50. At $50, credit cards and debit cards have nearly equal and predominant levels of preference. More than half of those using PIN-secured debit for purchases report spending more than when paying for purchases using cash or checks.
- 88 percent of consumers have a checking account
- 72 percent of consumers have an ATM/debit card
- 85 percent of cardholders reported using their ATM/debit cards at an ATM or at the point of sale in the 30 days prior to the survey
- 70 percent of cardholders reported using their debit card to pay for goods and services in the 30 days prior to the survey
About the survey
For 20 years, First Data's STAR Network has sponsored the Consumer Payments Usage Study annually to understand consumer payments usage habits and attitudes. The 2006/2007 edition of the survey, conducted by TNS Custom Research Inc., includes responses from more than 3,500 consumers in all census regions in proportion to their population. The results are statistically valid at the 95 percent confidence level with a margin of error of plus or minus 1.6 percent.