Why Debit Cards Are Still a Growth Product

Credit Unions can Grow Their Topline By Taking Advantage of Large Banks Deemphasizing Debit Cards.

After experiencing red-hot growth prior to the Durbin Amendment, debit card volume has slowed to a crawl. Many banks with more than $10 billion in assets shifted their focus from debit to credit cards in response to the cap on interchange fees. A study by the Federal Reserve Board shows that while average interchange fee per transaction remained stable among smaller institutions, they dropped by 45 percent among larger institutions.

The deemphasizing of debit by large banks opens opportunity for credit unions to grow debit card income among member segments currently underutilizing or not using debit cards.
FIS research has revealed substantial opportunity for growth among light users and non-users of debit cards, especially for credit unions, which generally have more than their fair share of non-users in their member bases. Heavy debit card users—the 35 percent of the population using their debit cards at least 10 times per month—account for 86 percent of in-person purchases made with debit cards. That leaves 65 percent of the market divided between light users and non-users.

So who are these consumers that are reluctant to use debit cards at point-of-sale? To be fair, a little more than one-third of them are avid credit card users and are unlikely to shift their purchases to debit because they like their credit card perks. But another big group—about one-third—are mostly cash users whose profile mirrors that of current debit card users—younger, low-to-middle income consumers who rely on payment methods that help them keep their spending under control. They will be the easiest to convince to swap their paper for plastic and their segment size makes them worthy of attention. Smaller and less attractive segments include older, middle income consumers who are tethered to their check registers to keep track of their spending and consumers who are light users of debit cards often because their spending is limited.

There are several good reasons for promoting debit card usage especially to cash-oriented members: foremost, debit cards can be terrific income generators for credit unions. The flexibility and ability to offer differentiated features and benefits as a result of superior economics allows credit unions to deliver greater value to their members. Converting existing cash, check, ACH, and ATM transactions to debit card transactions provides tremendous revenue-generating opportunity.

And, while increased revenue may be the biggest reason for credit unions to encourage debit card usage, cost reduction also is a factor. Debit card usage can substantially decrease the number of trips cash users make to ATMs and branch tellers. Plus, debit cards help accelerate the decline in paper check usage and, in turn, reduce costs associated with item processing.

Indirect benefits of enhanced member relationships also can be gained through debit card promotion. One of the top reasons why consumers choose a particular payment method over another one is their perception that the payment method helps them control their spending. Debit cards fill the bill for budget-minded consumers.

Credit unions can successfully promote debit cards at branches and call centers, especially during account opening through instant card issuance. Getting debit cards into the hands of members right away significantly increases card usage and, in turn, income for the credit union. A solid plan for expanding debit card usage among existing members includes: 1) prioritizing the types of members you have based on their banking behavior, 2) aligning your promotional strategies to motivate debit usage with your highest-priority targets, and 3) communicating key benefits of debit card usage that are relevant to your target.

A plan for expanding debit card usage should include:

Prioritize targets based on members’ behavior

  • Make frequent cash withdrawals
  • Write paper checks at POS
  • Infrequently use debit cards at POS

Align promotional strategies with targets

  • Incentives for front-line staff to promote usage among new and high-touch members
  • Merchant-funded or other rewards programs for deal seekers
  • Online/emails campaigns for connected consumers

Use benefit messaging relevant to the target(s)

  • Debit cards provide control over spending
  • Debit cards are an inexpensive to use (compared with checks)
  • Debit cards save trips to the ATM or branch
  • Debit cards are more convenient than cash or checks


Strategic Link is the NWCUA’s wholly-owned service corporation, using the power of aggregation to provide the Association’s member credit unions with exclusive high-quality, competitively-priced products and discounted services. Contact Director of Strategic Partnerships Craig Reed today to find out how Strategic Link can help your credit union save money while meeting its goals in 2013 and beyond: 206.340.4789, creed@nwcua.org.

Posted in Economy.