Credit Unions That Actively Manage Debit Portfolios Will See Higher Returns, says Visa Exec

CHICAGO – As debit cards have continued to grow in importance and value, Visa has sought to improve both their issuers’ management and growth of their debit card portfolios and their own growth of the product. At the issuer level, Visa says credit unions need to take a more active role in managing their debit card portfolios and stand to make a lot of money if they do, according to Stacy Pinkerd, senior vice president with Visa. Pinkerd addressed about 75 credit union executives attending a debit card symposium in Chicago on October 7. Card Services for Credit Unions, the association of credit unions which process their card transactions with Certegy, sponsored the symposium. Pinkerd told the executives that they needed to establish clear objectives for their debit cards’ rates of penetration, activation and usage, and he outlined the rewards a credit union can anticipate from doing so. A sample checking account program with 5,000 accounts will offer debit cards to roughly 3,500 of them, 3,000 of which will be activated. The cards will be used on average 11.9 times per month with a per use average of $38.00 But this portfolio can potentially grow dramatically. Increasing the cards’ penetration by 1% will yield an additional $231,000 in yearly sales from the portfolio, Pinkerd explained. An increase of 1% of card activation will add $271,000 in yearly sales and a 0.5% increase in usage will bring an increase of $684,000 in yearly sales. All together, those three approaches would bring in an additional $1,211,690 in yearly sales volume from those 5,000 accounts, Pinkerd said. He also advocated card issuers work to make their debit cards the “active preference” among card holders by establishing rewards programs for their debit cards as well as educating members at the time of account opening about the freedom their debit cards can bring them as well as the need to be careful with their cards. Interestingly, Pinkerd reported that 17% of Visa check card users qualify as “heavy users,” that these heavy users are predominantly (62%) female, their average age is 37, and they have an average household income of $65,662. Sixty-eight percent are married, 56% have children, and 70% are employed full time. Pinkerd described Visa’s efforts to continue to grow the product past the retail sector where, he reported, Visa check cards still record 47% of sales. The leading card brand has identified bill payment as an $820 billion potential new market for the popular cards. Within that he listed a $287 billion market for insurance payments, a $164 billion market for telecom payments and a $147 billion market for utility payments. Other new categories of debit card usage include Federal tax payments ($333 billion), charitable contributions ($214 billion), quick-serve restaurants ($138 billion) and transportation ($90 billion). Cards have only penetrated these channels by between 1% and 10%. Pinkerd also pointed out that more established channels, such as grocery stores, discount stores, service stations and drug stores still have relatively low rates of card penetration, indicating there is room to grow. But as rich as this new landscape might appear, there are challenges as well. Pinkerd described the phenomenon of networks which use personal identification numbers treating Visa check card transactions as PIN-based transactions, which bring less interchange to the issuers. The PIN-based networks do this by requiring insurance companies, utilities and other merchants to validate their customers’ identity before payments are made through some log-in or other means, thus removing the need for a PIN. The merchants also point out that there is less chance of fraud since the payments are being made onto existing accounts and there is a slim chance of someone fraudulently seeking to pay someone else’s bill. One challenge to this practice may arise from rewards programs which give consumers an interest in making sure that their Visa check card transactions are in fact treated as Visa check transactions. Currently, rewards programs and checking account statements treat the transactions as PIN-based transactions which do not carry rewards and, in some cases, can actually cost a token amount. -