Colloquy.com reports this morning about efforts by banks to turn the new signature-based debit cards (aka, “check cards”) into loyalty and retention vehicles, in part because it allows them to foster a deeper relationship with the consumer and in part because it allows them to differentiate their brands from other forms of payment.
“On the one hand, banks have at their disposal an increasingly popular and profitable banking product that still offers plenty of room to grow both market size and share,” Colloquy.com writes. “On the other hand, consumers have become embroiled in a tug of war between issuers and merchants over a counterproductive debate about the benefits of signature-based versus PIN transactions.”
The stakes can be enormous. One study suggests that debit card transactions at retail will grow at a rate more than twice that of credit card transactions. And Visa has already announced that the number of purchases (not the dollar amount) that took place during the first half of 2002 using its debit cards exceeded the number in which its credit card was used.
“With opportunity abounding for debit, some of the nation's largest banks have embraced loyalty as the tactic of choice both for increasing overall debit card usage and encouraging offline transactions,” Colloquy.com writes. “Their reasoning is simple—loyalty works. The surest way to drive customers to a preferred tender type—in this case, debit—is to enact sophisticated combinations of recognition and reward. Marketers have only to look to the most successful credit card reward programs as examples.”
“On the one hand, banks have at their disposal an increasingly popular and profitable banking product that still offers plenty of room to grow both market size and share,” Colloquy.com writes. “On the other hand, consumers have become embroiled in a tug of war between issuers and merchants over a counterproductive debate about the benefits of signature-based versus PIN transactions.”
The stakes can be enormous. One study suggests that debit card transactions at retail will grow at a rate more than twice that of credit card transactions. And Visa has already announced that the number of purchases (not the dollar amount) that took place during the first half of 2002 using its debit cards exceeded the number in which its credit card was used.
“With opportunity abounding for debit, some of the nation's largest banks have embraced loyalty as the tactic of choice both for increasing overall debit card usage and encouraging offline transactions,” Colloquy.com writes. “Their reasoning is simple—loyalty works. The surest way to drive customers to a preferred tender type—in this case, debit—is to enact sophisticated combinations of recognition and reward. Marketers have only to look to the most successful credit card reward programs as examples.”
- KC's View:
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Good piece, worth reading.
It seems to us that retailers operating loyalty programs may need to be concerned about possible confusion among customers. There shouldn’t be any cannibalization -- after all, a customer may actually end up getting two rewards for one purchase -- but there could be confusion about what is what.
Of larger concern from our point of view is the fact that these signature based debit cards are far more expensive to use than the PIN-based cards because of higher transaction fees, and therefore drive up retailer and ultimately consumer costs. That alone is reason enough for retailers to be against them, and is why the retailer suit against Visa and MasterCard is a good thing.
However, the overriding message -- that loyalty marketing is here to stay, and should be embraced by anyone looking to develop a relationship with the consumer -- also should be heeded.
