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Banks need not worry about "cannibalizing" their card portfolios if they offer customers alternative payment methods because both products attract different consumer segments, says Steve Karp, executive vice president of enterprise payments strategy at SunTrust Banks Inc. In a breakout session at the ATM Debit & Prepaid Forum hosted by SourceMedia in Las Vegas this week, Karp urged banks to take a step back from the big picture and recognize "what drives the use of one [payment method] over the other is payments preference [by consumers]." Offering alternative payments to bank customers is about trying to meet the needs of those who prefer to use alternative payments because of the perception of ease of use and increased security, Karp says. The argument against a bank offering alternative payments is a loss of interchange revenue. Alternative payments have rates similar to PIN-debit compared with higher rates associated with credit and signature PIN. "There is always going to be the card guy in the room who will say [alternative payments] are taking transactions away from cards," Karp says. That would only be relevant if consumers who are using alternative payments are also using cards, Karp adds. "That's just not the case," he says about SunTrust's internal research. SunTrust is piloting alternative payment methods, but did not reveal which companies it's working with. The bank wants to try alternative payments "to be defensive and at least try to get a few pennies back" that financial institutions lose every year to those methods, Karp says.
