Analyst Predicts Significant Competition In Debit Cards

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Expect to see debit card promotions becoming almost as aggressive as their credit card counterparts, predicts one cards expert.

"Debit promotions in general are really heating up," said TNB Card Services' Glen Lee. "The bigger financial institutions are really becoming much more aggressive and creative about how they promote their debit cards."

Lee cited Bank of America's "Keep the Change" automated savings program linked to debit card usage (see related story, page 1) as a prime example of this. "These savings-oriented promotional programs are just one way the big banks are really going after the debit market," he said.

And going after the debit market means going after the deposit market, which can be a more relationship-based product than credit, since it requires a consumer to open an account with his or her own money.

"Credit unions are going to start being attacked on the debit side the same way they have been on the credit side," Lee suggested. "So credit unions will have to be more innovative in the debit space than ever before."

The first salvo, Lee said, was the increased offering of different types of rewards programs tied to debit cards. That's being followed up with beefier marketing. "We are seeing advertising budgets for debit cards skyrocket," he advised. "The marketing dollars are suddenly a whole lot bigger."

That's because the debit card has become a second keystone, akin to the checking account, for the deposit relationship.

"I think we're going to see debit card offers like the credit card offers as the efforts to drive the deposit relationship grow," he said. "We're not seeing it in direct marketing, yet, but we are really seeing it pushed in mass media, and the natural progression of this is toward an aggressive direct marketing campaign. We are just seeing the first view of the intensification of debit competition now."

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