Decoupled Cards Could Have Legs In The Market
ATLANTA-The introduction of decoupled debit cards, which allow an institution to issue a debit card a consumer can use to access funds from a different institution, has raised alarms at credit unions. But what do consumers think of them?
Decoupled cards debuted in 2007 when Capital One rolled out the product, posing a competitive threat to checking account providers that stand to lose the fees and interchange income from debit cards. In addition to Capital One, HSBC is testing a decoupled debit card with CVS and Tempo Payments Inc. of California.
A new study from SYNERGISTICS titled "Optimizing Debit Card Programs" asked respondents to rate the value of a decoupled debit card-a stand-alone card that could be linked to any checking account even though it might be issued by another organization. Younger respondents- those ages 18 to 49-are more likely to perceive this as "very" valuable. Positive response also widens with frequency of debit card usage and is more prevalent among those debit card users that currently receive rewards (see chart).
"Providers should be prepared for competition from decoupled cards if this new product takes hold in the market, and the pressure is definitely on with Capital One's recent national rollout of their revised decoupled debit product which is tied to their reward program," said CEO William McCracken but noted the outlook isn't all bad. "Although these cards are a competitive threat to current debit card issuers, they could be used to a bank's advantage as well. Banks that 'decouple' their own debit cards could pick up independent debit relationships, gaining additional customers to whom they could cross-sell other services."
For info: www.synergisticsresearch.com.
'Nonbank Wallet' Offerings Expand Payment Options
NEEDHAM, Mass.-Alternative methods to pay for goods online are on the rise, driven by online merchants looking for more consumer-friendly options and consumers looking for greater security and choice.
According to TowerGroup, within the last two years, the nonbank wallet category has seen a flood of new entrants, including from major online companies such as Amazon and Google, to more focused players such as Moneta.
TowerGroup defines a nonbank wallet as an Internet-based storage service of consumer financial data, which helps facilitates online purchases without exposing consumers' financial information directly to the online merchant.
They do not replace traditional payment processes, but rather provide merchants and consumers with a secure layer that connects multiple payment methods and processes.
The challenge nonbank wallets present to the traditional payments system ultimately will be countered by the overall value they provide to the financial services industry as both clients and partners, TowerGroup said. This is in addition to the value they will drive among consumers, by continuing to build confidence around and drive transaction volume of e-commerce.
For info: www.towergroup.com.
When Inertia Isn't Retention: Does X+Y = Gen Leave U?
ST. LOUIS-Gen X and Gen Y might be better lumped together as Gen Leave U. A study by Maritz of 1,008 people found that 53% of Generation X customers and 61% of Generation Y had either changed their primary bank or considered doing so in the past two years.
"Younger people are usually more open to experimentation and are willing to take risks," said Thad Peterson of Maritz's financial services unit. "For older generations, I think it is a matter of inertia; it's simply too easy for them to stay where they are."
Baby boomers and the Silent Generation (62 years or older) proved to be the most loyal customers of banks. Many Gen Y (37%) and Gen X (36%) customers said they believed they would get better service at a different bank. Only 24% of baby boomers and 16% of Silent Generation respondents felt the same way.
Maritz said that Generations X and Y are more apt to find fault with their banks and may be up to three times likelier than members of the Silent Generation to leave. "The largest cohort to show up in demographics since the baby boom was born in 1990," Peterson said. "Concentrating on the boomers will be lovely stuff for the next 10 to 15 years, but the fact of the matter is that there's a huge group of people that are becoming the future of any financial institution."(c) 2008 Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com/ http://www.sourcemedia.com/
