Kristin R. MoyerAlistair Newton here. We’ve seen recent reports from retailers in the United States – Wal Mart and Target in particular – reporting significant reductions in the use of credit cards as a percentage of the overall payments made in their stores. Whilst the shift from credit card to debit card usage is not restricted to the US and has been pronounced over recent years – indeed Gartner research has been tracking this trend for some years – it now appears that more customers are shifting back to the usage of physical cash to help them better manage their financial affairs in these tough times.
What does this mean for banks and for the future of their payment card businesses? Well, it’s almost certainly a short term blip in the growth of payment cards – cards will undoubtedly remain as a key constituent of most consumers wallets and purses moving forward. However, it raises some interesting challenges for banks. If consumers learn the lessons from their over-stretched credit cards and the shift to debit card usage is maintained over the longer term, the impact on bank revenues will likely be significant.
More intriguingly, if the switch to cash as a means of better managing funds becomes a more permanent feature in customer behaviour, banks will need to reassess their strategies around ATM provisioning and physical cash handling.
More importantly though, banks must recognise any such shift for what it is – a cry for help and a strong signal from their customers that they are looking for ways to better manage their finances. If banks ignore these signals and fail to offer their customers better analytics and money management tools, then they risk alienating an entire generation of customers and severely damaging their payment franchises moving forwards.
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Category: Uncategorized Tags: atm, banking and investment services, cash, credit card, debit card, money management tools, payments
