HSBC Card: Decoupled, with a Twist

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LAS VEGAS — HSBC Finance Corp. plans to add credit capabilities to a decoupled debit card it is testing.

The banking industry is still in the early stages of evaluating decoupled debit cards, which use the automated clearing house network to connect to accounts at any bank. Enabling the cards to access a credit line as well would appeal to customers who are already carrying too much plastic, HSBC said.

The typical consumer carries 12 plastic cards, including nine credit cards, said Daniel J. Eckert, the head of product venture, acquisition, and development in HSBC's retail services unit.

"There's a natural limit there, somewhere," and HSBC's OptiPay could reduce this clutter, he said. "It is, in essence, a three-in-one card."

HSBC, a unit of HSBC North America Holdings Inc., the regional arm of HSBC Holdings PLC of London, is testing cobranded OptiPay debit cards with the drugstore chain CVS Caremark Corp. Besides the debit functions available now and the credit capabilities to be introduced in February, the "multitender" cards also access the CVS rewards program.

Mr. Eckert said during a presentation Tuesday at the Bank Administration Institute Retail Delivery conference in Las Vegas that cardholders would be able to decide at the point of sale whether to use the card for a credit or debit transaction, and that merchants would be able to accept the transactions using their existing card readers.

Most point of sale systems let people determine whether they want to use their debit cards for credit or debit purchases now; such transactions are routed over different networks but ultimately arrive at the same place, the cardholders' bank accounts.

HSBC's OptiPay works differently. The bank announced plans in April for the card, which runs across the network developed by Tempo Payments Inc. of San Mateo, Calif., formerly Debitman Card Inc.

Tempo's system, created to lower processing costs for merchants, routes debit payments through the ACH network. The credit transactions will be routed through the same network to a line of credit that the cardholders will have with HSBC.

Tempo came up with "a fairly disruptive technology," Mr. Eckert said. "We felt it was disruptive enough to build on." (HSBC invested $8.7 million in Tempo last year.)

CVS, of Woonsocket, R.I., is offering the cards at its 141 stores in the Indianapolis area, and Mr. Eckert said HSBC is planning a similar test in the New York-New Jersey area with the Carteret, N.J., grocery chain Pathmark Stores Inc. He said two other retail chains have signed similar deals, but he could not name them.

Separating debit cards from bank accounts was a "natural evolution" in the card market, Mr. Eckert said. He noted that issuers once had to make their own risk assessments, and in the early days would offer cards only to trusted customers.

However, the emergence of industrywide credit reporting and scoring systems allowed monoline card-issuing banks to proliferate, offering a wide variety of card products. Customers now "have complete choice for where they assign their affinity and sign up for a credit card," and decoupled debit cards will have the same effect on the debit market, Mr. Eckert said.

Capital One Financial Corp. of McLean, Va., rattled the industry last spring by introducing a decoupled debit card that delivers payments across the MasterCard Inc. network to the issuer, which then routes the transactions through the ACH system. These cards can be used at any merchant that accepts MasterCard.

HSBC's OptiPay cards can be used only at merchants that accept Tempo, about 300,000 locations now, Mr. Eckert said.

Other banks have responded warily to the idea, he said. "You're seeing equal parts plaudit and fear."

Tyson R. Nargassans, the president and chief executive of Saylent Technologies Inc., a Franklin, Mass., provider of software that banks use to analyze customers' debit card use, said the decoupling of debit cards from bank accounts "is the first of several innovations that will enable customers to use one card to connect to multiple accounts."

"Decoupling takes that first step. The second step is the combination of multiple cards into multiple institutions," he said. "Looking five years down the road, I think the card and the point of sale network will evolve so that I can use the same card to connect to any of my accounts at the moment that I choose."

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