In the past six months, consumers paid 61% of their purchases at shops, petrol stations, pubs, restaurants, hotels and other retail outlets by debit card and 39% in cash. It marks the achievement of the 60% debit card/40% cash target that banks and retailers agreed in 2014 when the percentages were still reversed. This emerged from a joint study undertaken by the Dutch Payments Association and De Nederlandsche Bank into consumers’ point-of-sale (POS) payment methods. The agreements to promote debit card use were made in the context of the Covenant on the Payment System, with a view to improving the payment system’s security and efficiency.
The share of debit card payments first broke the 60% barrier in May 2018
May 2018 marked the first period of twelve consecutive months in which consumers paid an average of 60% of their purchases at points of sale by debit card and 40% in cash, with which the target set in the Covenant on the Payment System was officially achieved. Although consumers used debit cards in POS payments for 60% or more several times in 2017, the annual average of 58.1% was still below the target percentage. Figures including those for June 2018 show that in the first six months of 2018 61% of purchases were paid by debit card and 39% in cash. Figure 1 shows both the monthly average and the twelve-month moving average debit card share of POS payments.
Debit card use highest in the 19-24 age group
The majority of population groups pay by debit card more often than in cash, but there are marked differences (Figure 2). Young adults aged 19 to 24 are the frontrunners in terms of debit card use in the Netherlands, paying 77% of their purchases by debit card and 23% in cash in the first six months of 2018. They also witnessed by far the sharpest increase in debit card payments (+9 percentage points relative to the first six months of 2017). In the past year, women, the 55-64 age group, people with medium-level education and university graduates started using their debit cards significantly more often (+4 percentage points), but the increase was limited in the 25-34 age group and among people with low-level education (<1 percentage point).
The increase in debit card payments is in part driven by the introduction of contactless payments in 2014. Currently about half of consumers’ debit card payments are contactless, which implies that three in ten of all purchases are paid in a contactless transaction. The 19-24 age group makes contactless payments relatively most often, for almost half of their purchases. The over-75s and people with low-level education do so least often, but even they now pay almost one in five purchases by just tapping their cards.
Debit card payments overtake cash payments in pubs, restaurants and hotels
The use of debit cards and cash still largely depends on market segment (Figure 3), but the differences are gradually becoming smaller. At present, debit card payments exceed cash payments in seven out of the twelve different market segments. In the first six months of 2018, the hospitality industry for the first time saw the share of debit card payments exceed that of cash payments. Not surprisingly, the growth in debit card payments in the last twelve months was sharpest in this segment (+7 percentage points relative to the first six months of 2017), followed by non-food retail (+5 percentage points) and street vending (+4 percentage points) (Figure 3).
The hospitality industry and street vending are market segments traditionally dominated by cash payments because of the small amounts involved and because debit card payments took long to become generally accepted in these sectors. Thanks to the introduction of mobile payment terminals and contactless payments, the use of debit cards in these segments has taken off. In the past six months, consumers in the hospitality industry and street vending made twice as many contactless debit card payments as standard debit card payments.