“Debit card or credit?” Not too long ago, the question was a ubiquitous refrain from store clerks nationwide. If asked today, the question would be more complicated.

That’s because US consumers have more choices than ever when paying at POS – and the list may soon grow again.

In addition to the litany of credit cards, debit cards, digital wallets, and BNPL options, pay-by-bank schemes may finally begin to scale in the US with the introduction of the Federal Reserve’s FedNow Service.

As the PSO payment landscape becomes more crowded, and banks and other payments providers continue to evaluate customer preferences and patterns of usage across these different platforms, it’s an excellent time to take a closer look at the humble debit card as a guide to the future of payments.

Understanding exactly how customers interact with debit cards and how secure they perceive those cards to be is the key to unlocking successful pay-by-bank use cases leveraging FedNow and will help define product strategy for optimising all real-time payment options, old and new.

Security is a Pain Point

One of the most significant issues confronting debit card users today is security.

Nearly 1-in-3 non-users of debit cards report “security concerns” as the reason they don’t use a debit card at the POS, more than any other reason. They are concerned about transacting directly from the account that, in many cases, holds most of their liquid assets.

As for debit card users, they have significantly higher customer satisfaction with their primary banks when they feel their debit card is “safe and secure to use.”

On average, bank customer satisfaction scores are 174 points higher (on a 1,000-point scale) when customers feel good about security.

They are also more likely to have opened new business at their primary bank within the past year. However, just 40% of consumers feel strongly that their debit card is safe and secure.

The stats echo the results of a recent J.D. Power Banking and Payments Intelligence Report, which found that more than one-third (36%) of all banking customers in the US say they have experienced some financial fraud in the past 12 months.

Incidence is highest among consumers under 40, who also happen to be the most prolific users of debit cards and need to adopt pay-by-bank solutions for them to scale.

As the potential for fraud grows due to digitization and economic conditions, it will influence customers’ payment choices at POS.

Building Trust

The good news for banks is that there is a clear roadmap to developing higher trust levels with debit cards and, eventually, pay-by-bank offerings.

The obvious first course of action is to continue ensuring that payment offerings connected to customers’ primary accounts are safe to use with limited instances of fraud.

According to the research, trust is also earned through timely communication.

When asked how a bank can demonstrate it cares about its customers, nearly two-thirds (64%) of customers say they want to be alerted to suspicious activity on their accounts.

That is almost double the second-most cited response of “offer a grace period before a late fee or overdraft fee is charged” (36%).

It’s a pressing need, as only 31% say they receive alerts about their account activity today.

Consumers take many other factors into consideration when choosing a payment method, according to the research.

But ultimately, the key to building trust lies in securing the payment method and the underlying account while proactively alerting and helping customers when potential fraud is identified.

Debit Card Security Paves the Way for Pay-by-Bank

As banks scale pay-by-bank solutions, security will significantly determine adoption rates and customer satisfaction.

The introduction of FedNow, and continued expansion of RTP from The Clearing House, have the potential to dramatically scale real-time payments, creating a game-changer moment for banks – if consumers become comfortable with the security of that format.

A big part of building that reputation for security will come from steps that banks can take now to shore up debit card security.

Now is the time to double down on fraud protection, response, and conflict resolution.

If banks can successfully demonstrate continued improvements in their ability to protect their customers’ debit card accounts, they will have a better chance of convincing them to try pay-by-bank solutions as they begin to grow.