IMGCAP(1)]
Although debit card rewards programs have proliferated in the last two years, experts say many card issuers are hesitating to pour more money into them because they are unsure whether debit rewards actually improve their bottom lines. At SourceMedia's ATM, Debit & Prepaid Forum in Chandler, Ariz., last week, Judith McGuire, senior vice president of Discover Financial Services' Pulse electronic funds transfer network, said debit card issuers are struggling to hit on a successful rewards formula. According to a study Pulse conducted earlier this year, 51% of financial institutions offer debit rewards, but only 18% of eligible customers have signed up for them. "Issuers are finding it to be a challenge to engage customers in these programs," McGuire said. Tony Hayes, a partner at Oliver Wyman and chairman of the forum, tells CardLine card issuers have not yet seen proof that debit card rewards drive ancillary revenue. "Issuers are hesitating to put more investment toward debit card programs because it's unclear whether debit rewards are driving additional card use and extra revenue," he says. "Issuers are not convinced they are not rewarding customers for behavior that would have occurred without a rewards program in place." Hayes says issuers instead are shifting their strategies to rewarding customers for a variety of account activities, including debit transactions. "What we are realizing is that very few customers will choose a bank based on its debit rewards program," he says. "But a well-designed program may help banks keep customers and consolidate more of their overall activity in one place." SourceMedia publishes CardLine.
