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A Finextra member
A Finextra member 12 November, 2009, 11:01Be the first to give this comment the thumbs up 0 likes

Very interesting.

From my recollection as a UK branch banker and subsequently a card product manager during the 80's and 90's, debit card fiunctionality was introduced on to ATM cards as a cheque replacement.  The charge to retailers was therefore largely settled as being a fixed charge at something like the levels of the charges for processing cheques.  This is vastly different from the credit card MSC, which is percentage based.  This severely reduces the income a bank obtains from debit card usage, and therefore significantly limits the money available to fund loyalty schemes, etc., compared to the credit card product.  Therefore, I don't see a huge movement towards introducing cashback and points schemes on debit card traffic.

The core product a customer buys is the current account.  The debit card is simply a replacement for the cheque book, i.e. as an access device.  Whilst there might be some mileage in using some form of debit card benefits as a means to attract current account customers (though the comments above show how difficult that will be financially), I think people make their current account decision based on other parameters.  Maybe if and when the card (or some other device with the card app on it) includes additional functionality, it could be seen as a value-add that can attract a premium...

I think one interesting development is the 'decoupled debit' that is emerging in the USA.  Here we might see the 'debit card' coming more into its own as a credit card competitor, and even a means to drive similar linked benefits.

It'll be interesting to see what happens.  I do share the view that debit card usage will continue to outgrow credit card usage, as people seek to establish greater control over their finances (though a credit card is as good as, and maybe better than, a debit card, where a customer has the discipline to only spend what they can aford to pay off in full each month).

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