By Aris Jerahian
Financial institutions continuously are looking at ways to capture and grow their market share with new payment products. Hybrid cards, which combine debit and credit into one plastic, are one of many new products emerging in the industry.
This type of a card certainly has the potential to broaden existing relationships between a credit union and its member. As well, hybrid cards, like the one recently debuted by Fifth Third, allow a card-issuing credit union to migrate signature debit transactions down a credit path, earning them increased interchange and the potential for interest income.
The key drivers for the success of the hybrid card model will be convenience and education. While there will always be a portion of the cardholder base that wants to keep their credit cards separate from their debit cards, another group will appreciate the promise of fewer cards in their wallets. So from that standpoint, the card may be attractive. But, as always, consumers will be looking at the entire package. They’ll be closely examining whether the convenience is worth the fees, rates and minimum balances that come with the card.
Many consumers are already confused about when to use debit and when to use credit. Hybrid cards alone will not ease that perplexity, so cardholder education will be very important. Financial institutions that roll out products like this will need to have a strategy in place for properly training cardholders. No credit union wants a cardholder to be surprised with finance charges for purchases he thought were being debited from his checking account. Spiraling cardholder satisfaction often causes a ripple effect, impacting a credit union’s entire member relationship.
As with all new payment technologies, we will have to wait and see if consumers accept this change. More importantly, we’ll have to see if the product encourages the kind of purchase behavior that is beneficial for both the cardholder and the issuer.
Aris Jerahian is VP/client relations for The Members Group, a CUES Supplier member based in Des Moines, Iowa.
