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In 2012, the debit industry in the U.S. beganto recover from the turmoil resulting from the Durbin Amendment,but that doesn’t mean smooth sailing by any means.
Two thousand thirteen may be the year of living dangerously asissuers begin to get past the regulatory changes imposed on themand move into new product territories like mobile, EMV, P2Ppayments, and prepaid cards.
The competitive market is beginning to turn up the heat as newentrants muscle their way in to stake out their claim in an alreadycrowded field. Looking into the year ahead, the followingrepresents some of our list of debit-related items and issues we’llbe following:
- Our consumer survey data showed that more than twice as manyconsumers believed checking account fees were fair in 2012 than in2011. This finding indicates consumers are making more fee-to-valuecomparisons, which will bolster the business case to provideenhanced services and could make free services appear lessattractive. For example, one of the areas ripe for breaking open isthe “great wall of offers” consumers need to navigate in order tomake sense of their discount opportunities. Rewards and loyaltyaggregation services, beyond simply providing a wallet to holdvirtual rewards cards, is an area debit issuers could explore toextend their loyalty value proposition into consumers lives outsidetheir financial institution. Other services might include:
Account management services, which include online-reconcilement,e-receipts, and loyalty.
Risk management services, which include proactive fraud alertsespecially for card-not-present payments.
Demographic-oriented services, which include product bundlesdesigned to address the needs of specific consumer groups such asethnic sectors and baby boomers.
- The idea of separating the online and offline consumer paymentexperience should be completely debunked by the end of 2013 andissuers are considering how their payment brand fits into theomni-channel buying and payment experience. This year, a few of thebig mobile wallet solutions finally entered the market includingISIS (open model), V.me (network model), and a re-engineered GoogleWallet (device-dependent model). Do any of these pose a near-termthreat to debit issuers? Mercator’s opinion is: Not in 2013. Butissuers who are not participating in theses pilots might want toconsider how their brand fits into these different business modelsand where they want to be positioned in a newly engineered valuestream.
- Mercator Advisory Group believes that 2013 is the year thatretail banks should move into the person-to-person (P2P) paymentsmarket as a new payment form and a means of expanding the value ofmobile banking services into retail payments. Breaking P2P out ofonline banking bill-pay sites and onto consumer handsets will helpmove the market forward into accepting new payment form factors andhelp debit issuers defend against non-bank centric products.
The most problematic competitors that retail institutions face arethemselves and the legacy of vertical product business lines, lackof actionable data, and fear of breaking apart business models,which are already in decline. Even with the challenges inherent ina developed and highly competitive market, we find that consumersstill consider their retail banks and credit unions trustedfinancial services partners. If that’s too optimistic for some (andmany nontraditional services advocates certainly think it is), itshould be a strong indicator that investments need to be made nowthat are critical to debit issuers interested in participating inthe next generation of pay-now products, services, andtechnologies.