Days of “Cash is King” are numbered

Three quarters (73%) of European debit cardholders are in favour of having their existing debit card replaced by one that can be used uniformly across Europe, new research commissioned by MasterCard has revealed.

The study of 3,000 debit cardholders in Belgium, France, Germany, The Netherlands, Poland and the UK, undertaken by KRC Research on behalf of MasterCard, found that eight in ten consumers (80%) want to be able to use their debit card anywhere in Europe as they do at home.

However, consumer awareness of the impending Single Euro Payments Area (SEPA) is significantly behind demand for the benefits it will bring in less than a year's time. From 1 January 2008, throughout the SEPA zone, debit cardholders must be provided with payment cards which allow them to make payments under the same basic conditions, rights and obligations, regardless of their location.

Javier Perez, President of MasterCard Europe, said: "The Single Euro Payments Area may currently be a term recognised in finance circles, but what the man-on-the-street needs to know is that they can use their debit card in the same way anywhere in Europe as in their own country. As our research shows, consumer awareness of 'SEPA' is low, but there is no doubt that debit cardholders across Europe are completely behind the concept.

“Every day, more people recognise the benefits of debit cards and turn their back on cash for day-to-day purchases. Our new research shows that European consumers agree debit cards are the payment method of choice for purchases between €10 and €199[1] and on a par with credit cards for larger amounts. The end of the cash era has been on the cards for some time and giving people the confidence to use their debit cards across Europe in the same convenient and secure way as at home will further encourage a future without costly cash – estimated at over 100 euro per person, per annum.”

Throughout Europe, fewer than one in ten (9%) debit cardholders have heard of the Single Euro Payments Area, suggesting a great deal more can be done to promote the concept. Awareness is even lower in The Netherlands (2%), France (3%), the UK (5%), Germany (5%) and Belgium (8%). In Poland, the newest European Union member, one in three (29%) recognise the term 'SEPA'. Of those who have heard of SEPA, only a small minority (9%) say they have a good understanding. This equates to fewer than 1% of debit cardholders across Europe.

SEPA driving debit card usage

After being told what SEPA is, debit cardholders are twice as likely to use their debit card to pay for purchases outside their own country across most retail categories, such as petrol, supermarket products, durables and food from restaurants, suggesting that consumer awareness programmes around SEPA can drive debit card usage.

For example, four in ten (38%) consumers currently prefer to pay for petrol with their debit card when travelling abroad, but after being informed about SEPA, this increases to seven in ten (68%).

Debit cardholders are split between thinking that either banks (34%) or consumers (33%) will benefit most from SEPA. Four in ten (40%) trust banks the most to provide information about SEPA. One in three (34%) trust consumer organisations the most. Banks are trusted the most to provide information by French (68%) and the least by British (27%) and Dutch (24%) debit cardholders.

Cash is no longer king

Consumers would rather reach into their pockets for a debit card ahead of cash, with eight in ten (80%) finding debit cards more convenient than cash as a means of payment, while two in three (67%) feel more secure using their debit cards over paper money.

The findings reinforce the view that the days of ‘cash being king’ are in the past and suggest that the increase in debit card issuance, which saw the number of Maestro®-branded cards rise by 5.7 per cent year-on-year to 287 million in Europe in 2006, is set to continue.

European consumers are also using their cards more frequently according to MasterCard. Four in ten (39%) debit cardholders say they have used their debit card more than the previous year. Only one in twelve (8%) believe they have reduced their debit card usage.

Debit improves financial control

The MasterCard research also found that nearly half of European consumers believe debit cards make it easier to control finances, ahead of a third (34%) who favoured cash. Out of the six European countries featured in the survey, French consumers felt even more strongly that debit cards make it easier to control their finances (70%).

Future debit card features drive consumer usage

Several potential debit card features could drive consumer usage in the future, according to the MasterCard findings. The vast majority of consumers suggest that added security against fraud (91%), more card acceptance locations (87%) and the ability to use their debit card anywhere in Europe (86%) would help encourage them to use debit cards ahead of cash.