DEBIT CARDS: STRATEGIES AND TACTICS (Apr 2015)

Role in the Payments Mix

Value-Added Services and Rewards

Security and Privacy Issues

Key Finding from a Recent SYNERGISTICS Research Survey:

In SYNERGISTICS 2013 survey, Payment Cards: Credit, Debit, and Prepaid, it was revealed that while rewards are abundant for credit cards fewer mention earning rewards via debit cards and prepaid cards.  Can reward programs be used to boost usage of debit cards even further?

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Highlights of the Study

This study examines consumer usage of and reaction to debit card programs, including pricing, rewards, special services and product innovations.  Security and privacy issues are also evaluated.

National Internet Survey – 1,000 consumers age 18 or older.

 

Key Dates

January 30, 2015 – Charter fee/Intro pricing ends.
January 30, 2015 – Final acceptance of comments on questionnaire.
April 2015 – Project Report available.

Strategic Questions

  • How has debit card activity changed in the past year, if at all? For what reasons have consumers increased or decreased their usage of debit cards?  Are debit cards preferred for some purchases instead of credit cards?
  • How should financial institutions respond to customers’ concerns over privacy and security? Have debit card users changed their shopping behavior in response to security breaches at major retail chains?
  • Is debit card user attrition a factor in the market? How large is the ex-user segment and is there potential for reactivating their usage?  Should nonusers overall be targeted for user base expansion?
  • Do rewards still have a role in debit card programs? To what extent are debit card users receiving rewards?  What are the perceived advantages and disadvantages of rewards?  Is there fee income potential for reward programs?
  • How do technological innovations impact how consumers use their debit cards? What is the experience with and reaction to contactless payments – both with cards and mobile phones – at the point of sale?  Are consumers ready for the implementation of chip enabled/EMV debit cards?
  • What is the position of debit cards – competitive or complementary – with other payment cards consumers use? What motivations drive the preference for one type of card over another?
  • What are the best variables or identifiers for segmenting the debit card user base for marketing efforts?  Are demographic traits or behavioral variables such as types and frequency of purchases effective targeting criteria?

Research Issues

  • Debit cards have experienced great success in recent years.  According to industry experts, the number of debit cards in circulation in the United States in 2012 was 283 million.  Electronic transaction volumes continue to soar as consumers write fewer checks and use cards more.  A number of providers have been implementing instant-issue programs to put debit cards in the hands of customers on the spot when checking accounts are opened at the branch.
  • The debit card product itself continues to change as providers add value-added services to attract consumers.  EMV implementation is beginning and issuers are adding chips to their debit card products.  What is the consumer response to chip debit?  There are also debit card programs that offer airline rewards, cash rebates, merchandise points, and charitable donations.  Debit card reward programs and value-added services may be implemented to help debit cards compete or collaborate with other available card products.
  • Prepaid cards are increasing in popularity, and credit cards continue to be widely used.  Of the 775 million general-purpose payment cards in the United States in 2012, 334 million were credit cards and 159 million were prepaid cards.  What role do debit cards play in the card product mix?  In addition, the increased usage of debit cards has made them more vulnerable to being targets for fraud and raised some issues for providers.  In this dynamic market, knowing the consumer perspective is essential to designing and optimizing debit card strategies. [F231]