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ARLINGTON, Va. – The much anticipated signature debit rewards program, VISA Extras, is expected to launch next month, but it may be rough going as industry leaders cite a number of potential stumbling blocks. Credit unions whose debit card holding members enroll in the program will be able to offer them a host of “everyday” rewards for the signature debit card. Points will accrue towards those rewards at the rate of one point per dollar spent for the first $4,000 of spending, and two points per dollar spent on amounts over $4,000. VISA is providing credit unions with training tools and the program will be bolstered by VISA advertising, so what’s not to like? Plenty according to a number of credit unions and credit card experts. The lead complaint appears to be that credit unions had to decide whether to opt-in or opt-out of the program in the space of roughly a month, in the late fall of 2002, without being given the new program’s complete details. This meant they had to commit to something without being able to fully evaluate it, noted Ron Silvia, director of debit services for PSCU Financial Services. Silvia praised the idea of the program overall, agreeing with other industry experts who believe that a rewards program for signature debit transactions is badly needed. But he worried that the short time-frame for the program’s start-up has meant that crucial support for the program might be slow to materialize and that VISA has not yet thought out some of the program’s technical aspects. “From our perspective as a processor,” Silvia pointed out, “it’s problematic that we hear about program details and developments at the same time our credit unions do. That means we have very little time to prepare to help our members put some of the program’s applications into place, should they decide to do so,” he said. Silvia made it clear that PSCU planned to support credit unions that participate in the program, but pointed out that kinks remained. Silvia also noted that VISA has not yet committed to provide participating credit unions the electronic reports on account activity that would make account management significantly easier. As far as Silvia knows, CUs will only get hard copy reports. Credit unions will need the reports because their members will sign up for the program on a dedicated Web site maintained by VISA, yet VISA doesn’t have to alert credit unions that members have enrolled. Likewise credit union members will redeem their rewards on the Web site, and both the enrollment and the rewards will mean expenses to the credit union. Each account enrolled will carry a cost of $2.10 per year as an administrative charge and the many “everyday” rewards will carry a cost of between $5 and $10. Some credit unions will attempt to recoup costs from the program by charging their members $15.00 to participate, according to some sources, even though VISA has acknowledged that this could drop participation levels for members from those institutions. Other complaints center on the rewards themselves. In the “everyday” base program one common reward is a $5 gift certificate to Blockbuster Video. That’s for 2000 points or $2,000 spent. That’s a perceived value of $2.50 for every $1,000 spent, which compares poorly with $12.50 in perceived value for merchandise programs or $20.00 in perceived value per every $1,000 spent in travel program. Some say that’s a lot of spending for not much of a reward. One source said at the average rate and size of debit card transactions it would take a typical debit cardholder seven months to collect enough points to get the $5 off a movie rental, he said. VISA Defends the Program Kenny Thomas, spokesman for the San Francisco-based card association countered that such criticisms of the program were unfair and off-center. “What’s being compared are not apples to apples,” he said. “Of course this program is not going to have rewards like one of the premier discretionary spending cards will have. It will also not have the annual fee that some of those programs have either.” Thomas pointed out that VISA Extras is meant to reward people for using their debit cards in everyday ways and that the rewards are consistent with that sort of use. He also pointed out that the program will offer better rewards for higher point levels that will come closer to rewarding the higher levels of spending. Thomas also acknowledged that the original time frame under which financial institutions had to decide whether to participate had been “aggressive” but pointed out that VISA’s Board, which is made up of card-issuing institutions, had decided that keeping to the original six-month schedule from program announcement to deployment was worth the effort. Thomas said he could not discuss features of the program in more detail until the formal launch and would not discuss the leading question many sources had raised: was it a good strategy to launch a debit rewards program when the outcome of the associations suit with Wal-Mart might significantly cut signature debit’s interchange rate? “I am not a specialist in the Wal-Mart case so it would not be appropriate for me to discuss potential outcomes,” Thomas said. But he added that since no one could no how the case would come out the association could not be expected to put all its plans for debit on hold waiting for a result. The case between Wal-Mart and other retailers and VISA and MasterCard goes to trial, barring legal delays, on April 28. [email protected]

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