Blog June 30th 2023

Debit Is More Important Than Ever: Evidence from the Federal Reserve Payments Study

With more U.S. debit volume becoming routable on July 1, 2023 - when the Federal Reserve’s clarification on the applicability of debit routing rights comes into effect – and the launch of FedNow in July, now is a critical time for merchants to reassess their payment acceptance strategies.

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Elizabeth Garner Divelbiss

SVP, Strategic Partnerships & Insights

And, if the latest triennial Federal Reserve Payments Study (FRPS) is anything to go by, the right approach is changing rapidly. Here are the core findings that merchants need to know.

Non-Cash Payments are Growing: How Does your Payment Mix Compare?

According to the latest FRPS, the value of business and consumer non-cash payments grew faster from 2018 to 2021 than in any previous three-year period, with an annual growth rate of 9.5% for a total of $128 trillion in 2021.1 Over the same 3-year period, the count of non-cash payments grew by 30 billion, increasing to nearly 205 billion in 2021.2 This is likely the result of more customers shopping through digital channels, especially during the global pandemic, coupled with a shift in preference towards non-cash payment methods in-store.3

But was this just a pandemic-driven outlier? The results suggest not; while in-person payments rebounded in 2021, remote payments remained on par with 2020 levels at several of the types of merchants who saw an uptick in 2020, indicating a potential long-term shift toward digital, non-cash remote payments.4

Given the overall growth in non-cash payments in the U.S. economy, it is critical that businesses develop a data-driven, digital payments strategy to optimize the customer experience, create efficiency and redundancy, and lower cost. There is certainly room at the table for a diverse set of digital consumer and business payment types, ranging from card payments to Pay-by-Bank solutions to other alternative payment methods. The first place to start is reviewing your own data to understand current tender mix trends and assess which payment experiences are most ripe for optimization and diversification opportunities.

Card payments aren’t going anywhere: are you optimized?

While alternative payment methods, including ACH, are a sizable portion of the value of non-cash payments (especially for business-to-business payments), cards continue to dominate consumer-to-business transactions. According to the Federal Reserve Payments Study, the value of card payments rose 10% per year since 2018, reaching more than $9 trillion in 2021. Furthermore, by transaction count, card payments accounted for over three-quarters of non-cash US payments in 2021 numbering 157 billion.

Types of Non-cash Payments

Reference: 2022 Federal Reserve Payments Study. Data for calendar year 2021.

Debit cards, in particular, accounted for nearly 88 billion payments – approximately 56% of all card payments in 2021.

This amounts to an 800% increase in debit card transaction usage over the past two decades, amplifying the importance for merchants of a robust, data-driven debit acceptance strategy – especially with the existence of competitive routing opportunities for debit cards in the U.S.

Credit cards – with a $96 average transaction value (ATV) – accounted for approximately 52% of the value of card payments while debit and prepaid – with a $43 ATV – accounted for approximately 48% of value in 2021.5 These average transaction values are an important consideration for merchants who are evaluating a payment diversification strategy as often the ticket size can impact the customer decision of which payment method to present at the checkout.

There is still tremendous utility in diversifying the payment methods you accept from your customer (i.e. enabling new shopping experiences, creating redundancy for customers, lowering cost, reducing customer contacts, etc.), but the latest evidence shows that a robust card acceptance strategy will have the greatest impact on the bulk of most merchants’ non-cash payment volume.

Customers are demanding Pay-by-Bank solutions

While several business payments continue to be made via Automated Clearing House (ACH) payments, mobile app solutions, the rise in person-to-person (P2P) payments, and improved Pay-by-Bank account credentialing solutions are paving the way for increased consumer-to-business ACH payments both online and in-store. According to the FRPS, the count and value of ACH transfers grew by 8.3% and 12.7% per year respectively since 2018, accounting for nearly $92 trillion and 72% of non-cash payments.6

These trends nurture a strong foundation for further growth in ACH and similar Pay-by-Bank experiences that will run on real-time payment (RTP) payments rails like The Clearing House (TCH) and FedNow, the latter of which is set to launch in July 2023. According to a May 2023 U.S. Federal Reserve Survey, 83% of businesses and 75% of consumers are already using faster payments and most anticipate using them more frequently as they increase purchases in on-demand, online payment environments.7 Faster payments are also strongly desired by businesses who can derive value from improved cash flow management, and nearly half of businesses believe faster payments will help them lower costs.8 Overall, both ACH and RTP payments provide merchants an opportunity to diversify both business and consumer payments.

As ACH credit and debit bank transfers –whose volume will gradually become supplanted with near real-time payments – continue to grow in parallel with card payments, it is critical for merchants to develop a robust payment diversification strategy – one that meets customers the way they want to pay as their preferences shift, increases acceptance efficiencies on cost, performance, and operations, and provides merchants with leverage over other non-cash acceptance terms.

Key Takeaways:

Evidence from the FRPS shows unprecedented growth in non-cash payments, making it critical for merchants to focus on a robust payment acceptance strategy that includes not only payment method diversification, but also optimization of cards. With continued growth in digital payments, there is more room on the table for all types of non-cash payment methods, and with growing volumes in electronic payments, merchants have more levers to build savvy negotiation strategies.

  • Debit card payments are a high-growth, competitive product in the U.S. Customers are selecting their debit cards for electronic payments twice as much as they did a decade ago and eight times as often as they did in 2000.
  • Debit cards account for over half of all non-cash payments. Given the frequency with which customers are selecting to pay with debit cards, every merchant and provider should focus on ensuring seamless debit user experiences and maximizing debit efficiencies for routing and back-end processes. CMSPI estimates that U.S. merchants can potentially save over $9 billion annually with a robust, data-driven debit strategy.
  • There is room at the table for ACH customers in the non-cash space, but cards are not going anywhere. The most robust payment acceptance strategies will contemplate all types of consumer non-cash payment methods – credit, debit, and prepaid cards, bank transfer payments (ACH & RTP), and a multitude of alternative payment methods.



  1. Federal Reserve Board – Federal Reserve Payments Study (FRPS).
  2. Ibid.
  3. Since 2016 the share of consumers who state a cash preference has dropped from 27 percent to 19 percent. 2022 Findings from the Diary of Consumer Payment Choice – Cash (
  4. Ibid.
  5. Federal Reserve Board – Federal Reserve Payments Study (FRPS)
  6. Ibid.
  8. As U.S. businesses navigate supply chain complexity and other economic obstacles, 62% noted cash flow management as one of their most impactful challenges and reported a need for greater flexibility and speed in their payment options.

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