Western Independent Banker - September/October 2008 - (Page 18)

By Peter Palumbo Debit at the Speed of Life: A Look at Debit Technologies on the Rise CONSUMERS ARE BUSIER than ever, regardless of profession or lifestyle. We want to get what we need quickly and easily so we can get on with our lives. Debit can help deliver the goods with speed and convenience, but what new technologies are available or on the horizon? Which of them are viable options? And how many of them will never take off? Can financial institutions truly benefit from these new developments, or will they end up costing more to do business? All emerging payment options – including contactless cards, decoupled debit and mobile banking and payments – have benefits, but each faces significant growth challenges. In this article, the PULSE® ATM/debit network provides analysis of the latest in new debit trends from the 2008 Debit Issuer Study, commissioned by PULSE and conducted by Oliver Wyman. Contactless Cards Several new technologies are emerging on the financial scene, offering a broad spectrum of accessibility and benefits. Contactless debit cards allow account holders to wave their cards over a contactless terminal, which then collects the electronic data necessary to complete the transaction. Contactless transactions are fast, secure and convenient, but the technology faces a classic standoff. Currently, there is a low penetration of contactless terminals in the retail market. Merchants are hesitant to incur the additional cost of purchasing contactless terminals when there is insufficient demand in the market. At the same time, account holders are less likely to adopt a new technology when acceptance is extremely limited. The respondents to the 2008 Debit Issuer Study that currently offer contactless cards reported that only 24 percent of their cardbase, on average, constitutes contactless users. In order for this payment form to flourish, there will need to be a significant increase in either acceptance or usage. Decoupled Debit An ACH-based product, decoupled debit enables a card issued by an entity other than the consumer’s financial institution to access the individual’s demand deposit account (DDA) – the exclusive domain of the financial institution until now. Third-party entities launching decoupled debit often use rewards programs as an incentive to attract consumers. Some financial institutions see decoupled debit as a business opportunity. For others who view it as a threat to their debit revenue stream, as well as to traditional customer relationships, there is an opportunity to use decoupled debit to strategically reposition their payments programs and fortify customer loyalty. According to the PULSE study, issuers that have been tracking decoupled debit within their customer base have seen extremely low adoption rates. One of decoupled debit’s primary growth challenges is the ability to offer a sufficiently compelling rewards proposition to convince consumers to adopt a decoupled card. Mobile Banking/Payments Mobile banking is one of the hottest trends in the market today. This technology allows account holders to access their accounts via cell phones or smart phones, often with adjustments in functionality that accommodate the limitations of a mobile display screen, as well as reduced or limited browser capacity. At its most basic, mobile banking allows account holders to access their accounts for balance inquiries, mini-statements and transfers between accounts held at the same financial institution. More advanced functions include actionable alerts for low balances, suspicious transaction activity and large withdrawals. Mobile banking also enables account holders to make electronic bill payments. In some cases, payments can even be made from one individual to another. Mobile banking can serve as a customer retention tool, especially for Generation Y users, as well as a means of detecting fraud. While the business case for mobile banking seems strong, most issuers are taking a measured approach. The PULSE study reveals that only 15 percent of the financial institutions surveyed currently support mobile banking. Another 28 percent say they are planning to introduce a program “soon.” Mobile payments, on the other hand, are those made through chip-equipped mobile phones or message-based payments. Although this technology has the potential to provide benefits similar to those of mobile banking, it is largely in the research phase at present, with 56 percent of issuers exploring the possibility of implementing these functions. Debit on the Move Every day it seems the fast pace of life is supporting the continued movement from paper-based to electronic payments. Financial institutions of all types and sizes should keep a watchful eye on the adoption and progress of these and other payments-related technologies and consider evaluating what makes sense for their cardholders. While the latest developments in debit technology face important challenges, the opportunities for strengthening customer loyalty, attracting new cardholders and boosting revenue offer exciting possibilities. Peter Palumbo is senior manager, business development, for PULSE (www.pulse-eft. com) in Mission Viejo, Calif., a Discover Financial Services company. He can be reached at 949-455-1924 or ppalumbo@ pulse-eft.com. 18 www.wib.org Western Independent Banker http://www.pulse-eft.com http://www.pulse-eft.com http://www.wib.org

Table of Contents Feed for the Digital Edition of Western Independent Banker - September/October 2008

Western Independent Banker - September/October 2008 Contents A Message from the President & CEO What To Do When Good Employees Go Bad! Remote Deposit Capture: What’s Your Target Market? Remote Deposit Capture: Lessons Learned Debit Decoupling: Part of Larger Merchant Funding Trend Debit at the Speed of Life: A Look at Debit Technologies on the Rise ID Theft Rule: Automating the Compliance Process Lose Paper and Gain Audit Trails Data Loss Prevention: A New Package on an Old Idea Securing Data in Transit Margin Management: Get in the Driver’s Seat Shopping for Cyber Insurance WIB Service Corporation Report WIB Calendar Welcome New Members Index to Advertisers advertiser.com

Western Independent Banker - September/October 2008

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