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SAN FRANCISCO -- Visa USA this week reported that its volume on purchases less than $25 in targeted small ticket segments totaled $27.3 billion in the first six months of the year, an increase of 17 percent over the same period in 2005. The double-digit growth indicates that Visa payment cards are increasingly being used instead of cash and checks for everyday purchases less than $25, according to a company press release.
According to a new Visa-sponsored survey of 1,154 payment cardholders, more than half (55 percent) of the respondents use payments cards for small ticket items less than $25, citing several reasons for the shift. Consumers are turning to cards for everyday purchases for the convenience (86 percent), ease of use (62 percent), speed (45 percent), and expense management (35 percent) benefits cards offer, according to the report.
"This significant increase in Visa usage demonstrates consumers desire to make more small purchases, from coffee to transit and even laundry, on their payment cards," said Niki Manby, senior vice president, product innovation at Visa. "We're meeting this demand by giving them more and more places to use their cards. At the same time, we're helping merchants with traditionally cash-heavy businesses increase sales, enhance their customers' experiences and improve throughput."
The rise in acceptance and use at heavy cash merchants comes after Visa's small ticket strategy, expanded earlier this year with its No Signature Required Program. The program has made small ticket payments more convenient for merchants and their customers by waiving the signature requirement for qualifying transactions less than $25 across 17 merchant categories.
To further encourage acceptance, Visa's Small Ticket Payment Service offers acquirers decreased credit and debit interchange rates on consumer card transactions of $15 or less in 14 merchant categories, the company reported. And Visa is also driving speed, convenience and sales to merchants through Visa Contactless, an innovation that makes electronic payments up to 25 percent faster than cash transactions.
Young Adults Leading the Way
Visa's survey results also revealed that Generation P or Plastic -- referring to consumers ages 18-25 -- is leading the trend of increased use of payment cards for everyday purchases. Sixty percent of Generation P prefers payment cards for purchases less than $25, particularly in new and emerging segments such as digital content, vending machines, public transportation, parking and newspapers, according to the company.
"Today's twenty-somethings are increasingly choosing payment cards for purchases of all sizes from everyday purchases to big ticket items," explained Manby. "These consumers have come of age during a time when the immediacy of electronic information, communication and commerce are the norm. Generation P doesn't remember when ATMs and debit cards didn't exist; they want quick and easy access to their funds whether they are online or on the go."
Furthermore, the surging adoption of the Visa check card is also giving rise to the overall use of payment cards for everyday purchases, the company stated. According to its latest spending data, 78 percent of all purchases less than $25 made with Visa cards in targeted segments are made with the Visa check card. And in Visa's survey, Generation P-aged respondents said they are more likely to use debit cards than other payment types, and often rely on debit cards linked to a bank account as an expense tracking tool.
Generation P primarily uses debit cards for 44 percent of everyday, small purchases, compared to 33 percent of cardholders over 45.
Micropayments on the Rise
Cardholder behavior for purchasing micro-priced goods and services -- purchases less than $2 -- with credit and debit cards in both online and physical environments was also part of the survey.
Generation P is again at the forefront of the growth in micropayments with 70 percent of consumers ages 18-25 willing to use payment cards for purchases less than $2, compared to only 26 percent of consumers ages 45 and older.
In the past three months alone, one in three Visa survey respondents (35 percent) aged 18-25 have purchased a cup of coffee or tea using a payment card, and one in five (22 percent) have purchased digital content, according to the company. And Generation P would like to have even more places where they can make everyday, small ticket purchases with payment cards, including vending machines (55 percent), highway and bridge tolls (50 percent), parking (46 percent), taxis (47 percent) and public transportation (38 percent).
"As consumers-at-large, and specifically Generation P, set the tone for the future of payments, Visa is focused on working with its merchant partners to encourage acceptance and develop innovative payment solutions that meet the needs of increasingly tech- and spending-savvy consumers," added Manby.