Facing the Debit Dilemma: Debit Issue Strategies
2004 ATM Deployer
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In our inaugural issue of On Payments, we discussed the ‘debit dilemma’ facing financial institutions in the wake of Visa and MasterCard’s settlement of the class-action merchant lawsuit and highlighted some strategies debit issuers could use to support the profitability of their debit portfolios given the industry’s new economics. In this issue, we explore the strategies issuers are using—or are planning to use—to make up their revenue shortfall.
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Facing the Debit Dilemma:
Debit Issue Strategies
This past summer, Dove interviewed 61 debit issuers across financial institution segments—large banks, credit unions, and community banks—to understand their competitive intentions given the new debit playing field.
We found that, despite significant changes to the dynamics of the debit industry, issuers are planning to ‘stay the course’ and do not intend to make significant changes to their debit strategies in the short term.
Issuers’ number one priority for debit is growth. Rather than focusing on ‘quick fix’ solutions, they will be implementing and intensifying strategies to increase card penetration, activation, and usage. [view chart]
By utilizing a variety of growth tactics, issuers unanimously predict that overall debit volume—both PIN and signature—will continue to increase at a robust pace.
In aggregate, financial institutions expect the debit market to grow by 20% over the next year (2003-2004), with additional growth in the out years. Within the debit market, financial institutions believe that PIN debit will grow at a slightly faster rate than signature debit (22% vs. 19%) as more merchants install PIN pads and PIN prompting becomes more widespread. [view chart]
In terms of interchange pricing, issuers anticipate that they will eventually be indifferent to whether their cardholders enter their PIN or sign their receipts when making a purchase with their debit card—and so will merchants. Issuers predict that, in the future, the direction of debit growth will be driven more by individual consumer preferences, and less by the dictates of issuers or merchants.
To learn more about how debit card issuers are responding in this new environment, click here.
2004 ATM Deployer Study
This winter, Dove will be conducting the 2004 ATM Deployer Study, the definitive guide to the current and future states of the ATM deployment industry. Sponsored by three leading EFT networks—CO-OP Network, PULSE EFT Association and STAR Systems—this study will explore deployment trends, business models, best-in-class deployer cost structures, advanced functionality, and pricing across the United States. To participate in the 2004 Study, or to learn more, click here.
Upcoming Conferences
The BAI Retail Delivery Conference & Expo is the largest conference of the year and attracts all of the industry’s movers-and-shakers. David Robinson, Executive Vice President at Dove and Kim Ravenda Benjamin, Senior Vice President and Director of Marketing at FirstMerit, will co-present at this year's event, to be held on November 18-20 in New Orleans. The session, "Hitting the Retention Hot Spots" will focus on strategies that banks can employ to dramatically reduce the extraordinarily high rate of new customer loss. To view the conference agenda, click here.
Recap: ATM & Debit Forum
Thomson could not have done a better job of selecting the date for this year’s ATM and Debit Forum. Set in the aftermath of the Wal-Mart settlement and the Department of Justice’s suit to block the First Data and Concord merger, the conference kicked off to another major industry development—Bank of America’s proposed bid to acquire FleetBoston.
The context of these events only added to the Forum’s overall theme of change. As conference chairman, Tony Hayes set the tone for the event by discussing the current and future challenges faced by financial institutions and payments organizations as they move forward. [read more]
ATM & Debit Quiz > Do consumers prefer to use PIN or signature debit? What is the average transaction volume for an ATM ISO?
Test your knowledge of facts and figures about the ATM and debit industries and compare your answers with Dove’s research findings—take our Payments Quiz.