Instant issuance has been the TV dinner of banking services. It is quick and convenient, but seemingly nothing special for what amounts to getting a credit or debit card in a new customer's hands only five or so days earlier than normal.
But that idea took hold before the advent of signature debit card interchange. Or payroll cards, health savings cards, and new student ID/debit combo cards that are being issued at campuses. And it fails to factor the customer relationship quotient when a lost or stolen card is readily replaceable on site.
Instant issuance is providing these and other favorable economic and intangible benefits, says Ron Zanotti, a vp at issuance technology vendor Dynamic Card Solutions. Zanotti says instant issuance now delivers a 50 percent improvement in first-day point-of-sale usage, which can add up to significant revenue generation considering extra transactions, multiplied by thousands of users, who get their cards early.
"Figure the loss transactions that would occur if you're sending the card in mail," says Zanotti. "If the date of first purchase was five days after issuing the card, and it was 10 days after mailing it, you've lost out on five days of transactions."
DCS reports it has thousands of branch deployments at more than 300 banks and credit unions. One of them is the $500 million Commonwealth Bank & Trust in Louisville, KY, were the institution has seen a slight jump in revenue attributed to instant issuance. "Our trend had been about a 10 to 15 percent growth in point-of-sale transactions year over year. We're seeing 17 percent this year" because of earlier activation, says Donna Wieber, svp and director of payments. "There's also the 'wow' factor, both for new account customers and those who call in a panic, and need a card replaced before they head out of town."
For issuers, the instant-card option has usually come down to customer convenience vs. the cost savings of bulk-volume orders in batch from processors like Fiserv's Personix, Oberthur or First Data. According to Wieber, those advantages have disappeared over the years due to the frequency of overnight delivery orders new customers were requesting-particularly those replacing lost cards or, more recently, replacing those compromised in data breaches.
Historically, says Bart Narter, Celent senior analyst, instant issuance was of interest mainly to institutions building tellerless branch operations at in-store grocery locations with ATMs that could issue and activate cards. Since the idea is to get customers self-banking at ATMs, they must have cards from day one. "In most 'normal' ways of doing retail banking, the banks have decided instant issue ATMs isn't worth the cost," says Narter. "A very limited number of institutions have tried...some successful, others not."
One who made it work was Washington state credit union BECU, the former Boeing Employees Credit Union. It uses instant issuance for dispensing temporary cards through the bank's ATMs, which are the sole means of interaction at 34 of BECU's in-store tellerless locations in the Seattle area. Members are incented to use the ATM for immediate funds availability with a machine deposit, rather than dumping checks off in a drop-box.
Canada-based President's Choice Financial, the electronic banking unit of CIBC, fumbled its U.S. expansion under the Amicus Financial brand when it tried to operate with Internet banking kiosks that featured instant card issuance in grocery stores. The in-store pavilions and convenience of immediate activation couldn't make up for the fact there weren't enough locations to bank at, says Narter. PCF was successful in Canada, Narter says, because it could tap its parent CIBC's network.
Narter says he agrees that the case for instant issuance may be evolving, particularly with the impact of debit interchange. "That rings true, and I'm sure banks look at the dollars," says Narter. "Those interchange fees aren't huge, but they're real."
Wieber estimates that even with the cost of equipment and software, which have to be installed and operated under strict VISA and MasterCard guidelines, the bank still manages to keep the cost-per-card under $1, for the estimated 500 cards it issues instantly each quarter. What she can't calculate is its worth to customers. In December, the bank had a slew of "TJX" customers, about 20 percent of the bank's cardholders, who were notified their accounts may have been compromised in the four-country, multi-million record data breach by Massachusetts clothier TJX Corp.
Wieber recalls one woman, carrying the notification letter from the bank's trust department, was floored to hear that she could have her card replaced that day. "She asked, 'How long would it take?'" Wieber says. "The branch manager told her, 'Well how long will it take you to turn around and enter a four-digit PIN?'"
