It’s hard to believe, but when debit first launched in the 1970s, industry experts were pessimistic. Many predicted that debit would displace credit, and issuers would end up losing money. But obviously that has simply not been the case. Consumer acceptance and success of debit by any measure has skyrocketed! In fact, credit unions have not only been able win with both credit and debit products; they’ve found that members demand both. And to make its outlook even brighter, the displacement that was predicted is coming from share drafts and not credit cards. That means, debit brings not only more interchange revenue to credit unions, but it also reduces costly share draft processing expenses! The Value of Debit Consumers have been closing the gap between debit cards and checks for years. (see graph) Debit products have filled consumers’ demand for easy and instant access to their funds anytime, anywhere. Meanwhile, credit cards have held firm in members’ wallets too. Consumers rely on credit cards for “pay later” items that are durable and have higher dollar values. It’s a conscious choice by the consumer which card they use at the point of sale. And they want that choice. Your job is simple: offer the payment products that members’ demand – or they will find a financial institution that will. Credit unions have always outperformed other financial institutions when it comes to service and building solid relationships. Debit cards are another cross-sell opportunity and more importantly, indicate that you are the member’s primary financial institution because you are typically the one receiving the core deposits accessed through debit cards. What’s more, according to Visa, 58% of debit cardholders said they would switch institutions if they discontinued their debit card programs. Debit is essential to developing, maintaining, and retaining relationships. The bottom line is that debit cards help to secure member loyalty and tie them closer to you. Key Marketing Strategies But just like all of the other products you offer, debit programs don’t just sell themselves. There is an education process that is involved to make your members feel comfortable with the functionality of debit. Demographics aren’t as important to study since active users are found in every demographic profile. People love debit, regardless of age, income, or gender. But there are four distinct types of users: no card or ATM card only, non-activated card, low-moderate usage, and high, sustained usage. This lifecycle of debit usage is the key to achieving the full profit potential of your card portfolio. To leverage lifecycle marketing, start by identifying which stage your debit card users fall into. Then tailor your communication efforts with these members accordingly: * Penetration (no card or ATM card only): Attract new cardholders and explain how to use the debit card product. If you only issue ATM cards now, consider converting those ATM cards to debit cards when they expire. Or, initiate an educational campaign to reach members like Michigan State University FCU in East Lansing, MI did last year. Their marketing campaign, “One + One = 19,864,000 Opportunities” reminded members that they could use their MSUFCU Visa Check Card anywhere Visa is accepted at over 19 million retailers and 664,000 ATMs worldwide. * Activation: Similar to credit cards, early card activation is essential. Stimulate first-time debit card use through educational and incentive programs. Commonwealth CU in Frankfort, KY hit both objectives at once with their “Earn a Reward” debit campaign. During the campaign period, cardholders earned $.50 every time they signed for a debit card purchase, instead of using their PIN. * Usage: The biggest challenge after you get the card into your members’ hands is to get them to use it often, converting them to active users. In particular, target usage among your members that use their cards at ATMs only. Educate these cardholders with simple marketing messages like, “It’s still your ATM card, but now you can use it to pay from your checking account wherever Visa/MasterCard is welcomed.” * Retention: Encourage “best cardholders” to continue using their debit card as frequently – or even more often – by introducing them to new places to use it, including such emerging debit markets as telephone/catalog, recurring payments, and the Internet. Remind cardholders that debit is “The easy way to pay for all your everyday purchases.” Plus, with Zero Liability, Verified by Visa and MasterCard’s SecureCode, it’s a safe way to shop. Still not convinced that debit will work for your credit union or your members? Then, consider this. During the first six months of 2002, VISA’s percentage of Check Card transactions surpassed the percentage of credit card transactions for the first time ever. History has already been made. Debit is here to stay.
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