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SAN FRANCISCO – VISA is still moving forward with its VISA Extras program, the mandatory rewards programs for its debit cards that is scheduled to roll out later this month, according to an association spokesman. The San Francisco- based card giant, however, is “reevaluating” the program’s details in light of the association’s agreement to cut interchange rates on its debit transactions. “We are definitely looking at some of the details of the program in the wake of the settlement,” said Kenny Thomas, VISA spokesman. “We are an association after all and need to get feedback from our financial institutions and the members who sit on our board of directors to decide what to do. As of now, we have made no changes,” Thomas said. What those changes may be seem unlikely to impact participation by financial institutions, since they have already signed on to take part. Space Coast Credit Union, the $1 billion institution based in Melbourne, Florida, is one of the institutions that decided to participate in the rewards program in order to help its debit card program achieve greater penetration. That goal remains in place whether or not the retailers suit cut the levels of interchange, an official with the credit union said in advance of the formal settlement announcement. Reward Programs Strengthened One well-placed industry source noted that, paradoxically, the card associations’ settlement will make rewards programs for debit cards, whether VISA Extras or those offered by another proprietary firm, more important not less. The executive pointed out that because financial institutions have taken a hit on their interchange income from debit, and because the networks which by and large process the debit transactions are not owned by financial institutions, there could be a more intense fight for the debit card portion of the payment pie. He predicted the settlement would change the way rewards programs are structured, however, with more of the programs allowing cardholders to pool their rewards points that they earn from various sources. The pooling would allow card issuers to induce cardholders to use the higher income signature cards, both debit and credit, and cut the overall per point cost of the programs. Allowing cardholders to pool their rewards points not only would help keep volume high for both credit and debit cards, it will further the drive to induce consumers to use cards rather than cash or checks. Winning the card fight with consumers is going to be primarily a matter of education, the executive explained. Card issuers have to educate consumers about the benefits of using their cards so that they make using the cards a habit, he said. He noted that the debit card has a largely untapped online market and one for recurring charges. This market, he noted, will likely carry higher levels of interchange and remains largely untapped. Rewards programs could be structured to introduce consumers into both card using scenarios. In this regard he echoed a recent study from the Boston based Dove Consulting that found that online and recurring transactions represent a large potential market for debit cards. Currently, only 3% to 5% of the more than $36 billion in recurring bill payments are made with a card-based instrument, Dove noted. However, “the changes to the `honor all cards’ policy opens up new market opportunities for debit acceptance, especially for recurring bills and electronic bill payment,” notes Richard Crone, vice president of Dove’s Financial Services practice. “Lenders such as credit card issuers, mortgage companies and many other recurring billers and online merchants can accept debit cards, increasing the opportunities for significant increases in electronic payments,” said Crone. [email protected]

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