Consumers in record numbers are ditching cash and checks in favor of debit and credit cards and automated payments. For the first time, debit- and credit-card payments surpassed cash and checks as payment methods for in-store purchases, according to a survey released last week by the American Bankers Association and Dove Consulting. And 60% of consumers now make automated bill payments, the survey says.
To keep up, payment processors and financial institutions are boosting their transaction platforms. Visa U.S.A. spent the last 10 months upgrading its VisaNet system to handle a peak rate of 5,200 transaction messages a second-nearly 19 million an hour-during this year's holiday season, up from 4,700 last year. The debit- and credit-card-transaction processor expects to hit this all-time high by Dec. 24. Visa processed 14 billion transactions, worth more than $1 trillion, in the 12 months ended March 30, the first time it has passed the $1 trillion mark in a 12-month period.
With 400 million debit and credit cards in circulation in the United States, Visa is one of the biggest users of specialized IBM mainframe technology for high-volume systems. IBM's Transaction Processing Facility is a real-time operating system and bundled server software that American Express, Citibank, and four major airline-reservation systems also use to handle high-volume transactions securely and with minimal downtime.
Visa balanced processing loads between its two U.S. data centers, enabling merchants to process customer payments faster. It also enhanced the system's ability to share data with member financial institutions, reducing dispute-resolution time from days to hours and cutting chargebacks, says Rick Knight, senior VP of global operations at Inovant, Visa's processing subsidiary. Pattern-recognition capabilities were added, as well, to spot transactions likely to be fraudulent, Knight says.
With debit and credit cards accounting for 52% of in-store transactions versus 47% for cash and checks, according to the ABA and Dove Consulting survey, Visa's efforts couldn't be more timely. Debit cards alone account for 31% of in-store transactions, exceeding credit cards (21%) and checks (15%) and nearly equal to cash payments.