By Aris Jerahian
Predictions about the post-Durbin debit marketplace have been wide-ranging since even before the Federal Reserve Board announced its plans for an interchange cap.
Conjecture has only increased since the Senate failed to pass a delay. With final rules expected this week, it seems everyone is speculating how card issuers, merchants, networks – and even cardholders themselves – will react once the final rules are put into place.
All the noise is causing many credit unions to make dramatic changes – most notably the elimination of free checking. Debit rewards programs have also been halted as many of the industry’s leading analysts foretell the doom of debit.
If your CU has found itself questioning the future of debit or giving into the temptation to reinvent your debit program in a knee-jerk fashion, stop. Do not give in to the “sky is falling” mentality. Debit is – and will continue to be – a very strong payment method and revenue-generating offering for your financial institution.
That’s not to say that you won’t have to make adjustments for what appears to be an inevitable – and maybe even dramatic – decrease in debit interchange income. But these tweaks to your debit program don’t have to alienate your long-term members or derail your mission to be an accessible, affordable option for your community’s financial service needs. In fact, they can be quite the opposite.
Shift your thinking away from “How do we increase fees?” and toward “How do we increase transactions?” Whereas the former is a question clearly dominating the behavior of your big-bank competition, the latter is one that keeps your focus on the member-cardholder.
It’s a simple concept. The more your cardholders swipe debit cards issued by your credit union, the more interchange your CU receives.
Here are three ideas for changing the way your CU runs its debit program. Each is focused, of course, on maintaining the profitability of your debit portfolio. But just as importantly, each takes into consideration your cardholders, what they are looking for in a contemporary debit card program and how you can win that coveted top-of-wallet position.
1. Market to young adults. Aside from the obvious – that this segment is the second largest population in the United States – young adults make excellent debit cardholders. Going direct to these consumers is a terrific marketing approach. Securing kids as savings customers early on in their financial lives makes it much easier to secure them as debit customers down the road. However, another way in the door with this population is to reach one of their main influencers – parents.
2. Step up fraud prevention. The recent breach at Michael’s craft stores across the nation made a lot of consumers sit up and take notice, refocusing their attention on the risks they face every day as a debit cardholder. By making your CU’s debit card more secure – and communicating this strength to your cardholders – you can bet more of them will reach for your debit card vs. another when it comes time to make purchases.
3. Get debit cardholders moving into mobile . Simply having a mobile banking application is not enough, though. It’s how you win over first-adopters of mobile that will really make the difference to your debit program. Being able to access account balances on the go will encourage members to do more with debit. So keep the mobile banking interface simple, communicate the security benefits and make a commitment to the continuous improvement of your mobile banking product. Think outside of your online banking customers, because mobile is an entirely different beast that can support your members' use of debit.
Aris Jerahian is VP/client relations for TMG, a CUES Supplier member in Des Moines, Iowa.
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Four more tips on increasing debit transactions are available inside Aris Jerahian’s white paper, Bracing for Durbin.
