Instant Issue Cards Can Cut Costs, Boost Revenue
Even in the best circumstances, it can take more than 10 days for a member to receive and use a debit or credit card issued by traditional mail. Some cards get lost in the mail, creating further delays, potential security problems and dissatisfied members.
Whether issuing new cards or replacements for lost or stolen cards, many credit unions have switched to instant issue cards to eliminate postage, cut other costs, improve efficiency and enhance security.
Credit unions with instant issue have 15% higher debit card activation on new accounts, 20% higher swipes per new account and 20% higher debit card spend per new account, according to recent research on ways to increase noninterest income by Haberfeld Associates, a financial consulting firm based in Lincoln, Neb.
“With margins being squeezed, alternate income needs to be examined,” Bill Carhart, CEO of Oswego County FCU said. “By making the debit program a focus and creating additional interchange income via more efficient debit card operations, the margin squeeze can be eased a bit.”
The $58 million cooperative in Oswego, N.Y., discovered that many of its 9,000 members did not activate ATM cards sent through traditional mail.
“It was simply a waste of money and extremely inefficient,” Carhart said.
To improve efficiency, Oswego recently switched to EFT Source's instant issuance solution, Card@Once, for debit cards. Now members can get new cards or replacements in the branch, almost instantly, without paying a fee for expedited delivery. By speeding up the card issuance and activation process at Oswego, member satisfaction went up – and so did interchange revenue, Carhart said.
“Operations in relation to debit cards have become much more efficient, inactive cards were reduced by over 75%, and we increased usage and interchange income by leaps and bounds,” he said.
Carhart said within the first year, average transactions increased more than 22%, average checking account balances increased 20%, total spending per cardholder increased by more than 17%, and monthly interchange income grew by 13%.
Oswego also experienced a decrease in processing changes since the number of inactive cards dropped significantly, Carhart said.
“Also while it's hard to measure, the members’ overall satisfaction with the debit card, not having to wait for new cards and the increased overall efficiency within the program has been tremendous,” he said.
Switching to instant issue cards was a breeze for Oswego County FCU, according to Carhart.
“It was a simple transition from installation, to training, to producing actual cards,” he said. “Our institution does not have heavy IT resources so developing an infrastructure to integrate with our systems was not an option.”
Card@Once does not require licensing, software or maintenance fees, said Bill Dinker, president of EFT Source in Nashville, Tenn. There is a one-time cost for the equipment and a personalization cost for each card produced, he said.
Cards delivered by Card@Once can be blank or institutions can choose custom stock, the company said. They are permanent cards, not temporary, which are activated immediately or, at latest, by the end of the day. The activation depends on whether the core processor sends batch files immediately on an individual basis or all at once.
In addition to debit and credit cards, some instant issuance systems can deliver almost any type of payment card, including prepaid or Health Savings Account cards. Instant issue debit cards are the most widely used, according to industry experts.
Instant issuance technology has experienced rapid industry adoption, according to industry insiders. For example, EFT Source has issued more than half a million Card@Once cards in the past year and expanded its customer base by more than 200%, Dinker said.
Following recent major data breaches, Dinker said, there was a surge in the number of cards issued with Card@Once.
“With instant issuance, many of the pain points that the affected banks and credit unions felt were alleviated, proving that this technology is critical to quickly and seamlessly reissuing cards,” he said.
However, Dinker cautioned that instant issuance should not be used for mass issuance of payments cards, which he said ideally should run through a service bureau environment.
For credit unions contemplating whether to use instant issue cards, there are many factors to consider.
“When comparing options, it is important to understand the server and infrastructure development required to deploy the system, as well as the maintenance programs and technical support available,” Dinker said. “Institutions should only work with providers that are PCI-DSS certified and meet the security guidelines of payment card brands.”
In addition, he said, the solution should be EMV-capable and offer comprehensive reporting, monitoring and administrative tools for maximum security.
Card@Once uses the software-as-a-service delivery model, making it a plug-and-play option.
“It was designed specifically for institutions who have limited IT or capital expenditure resources to install servers and build the infrastructure to integrate with all of their core systems,” Dinker explained. “And because we are a service bureau for card issuance, EFT Source manages all key components, PCI and security requirements, and plastic inventory.”
Instant issue offers a prime opportunity for credit unions to create a great value proposition for members, according to Steve Darke, account executive at the Wixom, Mich.-based CTS North America, another provider of instant issue services.
“Consumers are indicating their preference for receiving new and replacement cards via in branch instant issue because their card is their primary payment vehicle,” Darke said. “In addition, consumers perceive receiving their cards through instant issue as more secure than receiving a replacement card and PIN in the mail.”
Credit unions that use CTS’ desktop card embossing and customization systems achieved higher average card activation and usage rates, particularly in the first 30 days, he said.
In addition, they eliminated card and PIN mail production.CTS offers several instant issuance systems. For instance, Darke said, the company's CPS 1800 system provides for continuous availability, card embossing and color printing, and software certification.
“There is virtually no preventative maintenance and no need for branch staff to constantly clean the unit to avoid card jams,” he added.
Darke offered this advice for credit unions contemplating instant issuance.
“PCI compliance is a must,” he said. “Also, integration with the card management system–instead of a completely manual process–will shorten the consumer wait time and increase overall capacity and consumer acceptance. Automate the new processes where possible (such as replenishment), and remotely monitor the network health and status.”
Darke also suggested considering in branch self-service or assisted self-service versions to further increase capacity.