Consumers might abandon credit cards and push $100 billion of spending onto debit cards every year because of coronavirus, a Visa executive says
- Consumers are using more debit cards compared to the other high-end option of credit as a result of the coronavirus pandemic, Visa has found.
- Visa's US credit-card volumes fell sharply in May year-on-year, while debit-card usage grew 12%, according to an SEC filing this week.
- The payment-card company's internal analysis found that the transition could drive away $100 billion annually from credit to debit cards.
- "There's a consumer psyche of sort of not spending someone else's money but spending my own money," said Oliver Jenkyn, Visa's North America group executive.
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Consumers are likely to pull billions of dollars of spending away from credit cards and onto debits cards in the coming years, driven by the fear of being in debt during the coronavirus pandemic, a senior Visa executive said this week.
Consumers are turning to debit cards in what could be a $100 billion annual shift from expensive high-end credit cards over time, according to Visa executive Oliver Jenkyn.
US credit-card volumes declined by 21% in May year-over-year, while debit card volumes grew 12%, as per Visa's SEC filing this week.
"There's a consumer psyche of sort of not spending someone else's money but spending my own money," Jenkyn, Visa's group executive for North America said at Wednesday's Baird 2020 conference.
A similar situation transpired in 2008 during the financial crisis, in late-2018 during President Trump's government shutdown, and the initial clashes from the trade war with China when the stock market took a big dip, Jenkyn said.
Consumers pulled back on credit and shifted to debit then too, common trend during economic difficulties.
Visa saw a 12-percentage-point increase in total consumer spending through e-commerce channels, but said this was "not surprising" since stores were largely closed.
The Covid-19 pandemic is the catalyst that led to a transition to digital payments and a shift in consumer spending which will carry forth in the long-term, Jenkyn said.
He also said consumers would shift to more pragmatic "low or no fee cash back cards" rather than "high-end high annual fee" travel cards.