An Easy Decision

Article excerpt

Debit cards present an enormous opportunity for community banks

Competitive pressures, increased customer service expectations and consumer desire for easier, quicker payment services are three forces facing community banks today. As a result, many community banks look to their ATM card programs to strengthen existing customer relationships, attract new customers, increase profits and continue offering excellent service.

Increasingly, the solution is the debit card. While all ATM cards are "debit cards," what I call debit cards are those ATM cards with a Visa or MasterCard logo. Debit cards are still relatively new in the United States, but in the rest of the world this convenient, safe alternative to cash and checks is already a generally accepted method of payment for everyday purchases.

U.S. consumers are catching on fast, however, and they have made it abundantly clear that they are ready for debit cards now. Debit card sales volume in the U.S. grew at a compound annual rate of 40 percent from 1989 to 1993. Volume has increased at more than 100 percent annually since then. Debit cards' share of the total payments market is expected to expand fivefold by the year 2000. The growth rate for debit cards far surpasses that for credit cards, and it will accelerate as more consumers learn about the many advantages of this new payment vehicle.

Debit cards have been promoted in so many articles and newsletters that many of you are getting tired of hearing about it-but our information still shows less than 50 percent of IBAA member banks are issuing debit cards. And I believe all of you need to have them in your arsenal of products and services to retain your good customers and attract additional valuable new customers. Why?

In a recent MasterCard study, 65 percent of the U.S. ATM card users interviewed said they would like "a more useful ATM card that also works like a check." And 30 percent said they would actually change financial institutions to enjoy the benefits of debit cards. In light of such strong consumer demand, the time is right for your bank to evaluate offering a debit card program to your customers.

Through Visa and MasterCard, IBAA Bancard Inc. has compiled a list of some of the factors of why consumers demand debit cards:

Convenience-Can be used anywhere Visa or MasterCard is accepted;

Easy to use-Simple, same process as credit card, no Personal Indentification Number to remember;

Quick to use-Faster and easier than writing a check;

Reduces need for cash-Can be used to reduce the ATM surcharges your customers may be paying;

Easy record keeping-Single statement for consumers to keep track of where they spend their money;

Consumer protection-Ability to charge back defective purchases; and,

Worldwide acceptance-No more "out of state check" hassles. …