OPTIMIZING DEBIT CARDS (Jan 2018)

Role in the Payments Mix

Rewards and Enhancements

Fraud and Security Issues

Key Finding from a Previous Phoenix Synergistics Report:

In the 2015 Phoenix Synergistics survey, Debit Cards: Strategies and Tactics, findings revealed that most see debit cards as a replacement for cash and checks.  Few see debit cards as a credit card replacement.  Has this perception changed in the last few years.

Research Description and methodology

This study examines the consumer perspective on debit cards and their role in the payment mix. Issues concerning rewards, enhancements, and security are assessed.

National Internet Survey – The survey features 1,500 online interviews with consumers age 18 or older.

Key Dates

October 27, 2017 – Final acceptance of client comments on the questionnaire.

October 27, 2017 – Charter fee date.

December 2017– Initial results available.

January 2018 – Project Report available.

Strategic Objectives

  • Assess changes in debit card activity. Identify reasons for which consumers have increased or decreased their usage of debit cards. Determine if debit cards are preferred over credit cards for some purchases.
  • Determine the extent to which customers’ privacy and security concerns are impacting debit card behavior. Identify types of fraud or identity theft occurrences consumers have experienced. Evaluate reaction to an “on/off switch” for debit cards.
  • Assess the state of debit card reward programs. Measure the extent to which debit card users are receiving rewards. Determine the perceived advantages and disadvantages of rewards.  Assess the fee income potential for reward programs.
  • Evaluate how technological advances affect how consumers use their debit cards. Examine experience with mobile payments, mobile ATM access, and P2P payments. Gauge consumer reaction to the implementation of chip enabled/EMV debit cards.
  • Examine the position of debit cards against credit cards. Identify the motivations that drive the preference for one card over another.  Gauge the impact of a combined rewards program.
  • Examine the perceptions of nonusers of debit cards. Determine if user attrition is a factor in the market. Evaluate the potential for targeting  ex-users and nonusers to expand the user base.
  • Profile and segment the debit card user base for marketing efforts.  Determine which demographic traits or behavioral variables are most effective for targeting advertising  or marketing communications.

Research Issues

  • Debit cards have become one of the most popular and widely used payment methods out there – alongside credit cards, cash, checks, and various online and mobile payment innovations. In addition, new non-traditional payment providers are beginning to offer their own debit products. So the question becomes what role does the debit card product play in today’s diverse payments market?  Has the increasing popularity of debit cards impacted other payment methods or do new methods threaten to disrupt the debit card’s strong track record?
  • In this evolving payments environment, providers continue to re-work and upgrade the debit card with value-added services such as identity theft insurance, credit report monitoring, and price protection to name just a few.  Some issuers continue to offer debit card reward programs that offer airline rewards, cash rebates, merchandise points, and charitable donations.  Issuers may implement debit card reward programs and value-added services to help debit cards compete or combine with other card products.  Allowing customers to personalize debit cards with custom pictures can provide incremental revenue.  Providers continue to evaluate instant-issue programs that put debit cards in the hands of customers on the spot when checking accounts are opened at the branch.
  • Unfortunately, the increased usage of debit cards has made them more vulnerable to being targets for fraud.  In response, some providers have added an on/off switch to their debit card products in the form of a mobile app.  EMV implementation is moving along and issuers are adding chips to their debit card products.  What is the consumer response to chip debit?  In the dynamic payments market, knowing the consumer perspective is essential to designing and optimizing debit card strategies.