TROY, Mich.–The security around debit cards is an increasing concern to consumers as point-of-sale payment options proliferate, according to the findings of a new J.D. Power survey.
“As the point-of-sale payment landscape becomes more crowded, and banks and other payments providers continue to evaluate customer preferences and patterns of usage across these different platforms, it's an excellent time to take a closer look at the humble debit card as a guide to the future of payments,” according to J.D. Power.
The company said understanding exactly how customers interact with debit cards and how secure they perceive those cards to be is the “key to unlocking successful pay-by-bank use cases leveraging FedNow” and will help define product strategy for optimizing all real-time payment options, old and new.
One Pain Point: Security
One of the most significant issues confronting debit card users today is security, J.D. Power said.
“Nearly one-in-three non-users of debit cards report ‘security concerns’ as the reason they don't use a debit card at the point of sale, more than any other reason,” the company reported. “They are concerned about transacting directly from the account that, in many cases, holds most of their liquid assets.
“As for debit card users, they have significantly higher customer satisfaction with their primary banks when they feel their debit card is ‘safe and secure to use,’ the analysis continued.
J.D. Power reported that on average, bank customer satisfaction scores are 174 points higher (on a 1,000-point scale) when customers feel good about security.
“They are also more likely to have opened new business at their primary bank within the past year,” J.D. Power said. “However, just 40% of consumers feel strongly that their debit card is safe and secure.
Part of New Report
The findings are included in the new J.D. Power Banking and Payments Intelligence Report, which further found that more than one-third (36%) of all banking customers in the United States say they have experienced some financial fraud in the past 12 months. Incidence is highest among consumers under 40, who also happen to be the most prolific users of debit cards and need to adopt pay-by-bank solutions for them to scale, according to the company.
“As the potential for fraud grows due to digitization and economic conditions, it will influence customers' payment choices at the point of sale,” J.D. Power added.
Building Trust
The good news for financial institutions, according to J.D. Power, is that there is a clear roadmap to developing higher trust levels with debit cards and, eventually, pay-by-bank offerings.
“The obvious first course of action is to continue ensuring that payment offerings connected to customers' primary accounts are safe to use with limited instances of fraud,” the company said. “According to J.D. Power research, trust is also earned through timely communication. When asked how a bank can demonstrate it cares about its customers, nearly two-thirds (64%) of customers say they want to be alerted to suspicious activity on their accounts. That is almost double the second-most cited response of "offer a grace period before a late fee or overdraft fee is charged" (36%). It's a pressing need, as only 31% say they receive alerts about their account activity today.”
Consumers take many other factors into consideration when choosing a payment method, according to the research, J.D. Power stated, before adding, “But ultimately, the key to building trust lies in securing the payment method and the underlying account while proactively alerting and helping customers when potential fraud is identified.”
Paving the Way for Pay-by-Bank
According to J.D. Power, as financial institutions scale pay-by-bank solutions, security will significantly determine adoption rates and customer satisfaction.
“The introduction of FedNow, and continued expansion of RTP from The Clearing House, have the potential to dramatically scale real-time payments, creating a game-changer moment for banks—if consumers become comfortable with the security of that format,” J.D. Power said. “A big part of building that reputation for security will come from steps that banks can take now to shore up debit card security. Now is the time to double down on fraud protection, response, and conflict resolution.
A ‘Better Chance’
“If banks can successfully demonstrate continued improvements in their ability to protect their customers’ debit card accounts, they will have a better chance of convincing them to try pay-by-bank solutions as they begin to grow,” the analysis added.
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