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Make the most of your debit card program

February 19, 2014 by Jim Ghiglieri — Senior Vice President, Corporate Communications, SHAZAM

A ruling on the U.S. Federal Reserve’s appeal of the Leon decision that overturned the cap on debit interchange could take up to a year. While the majority of community financial institutions are expected to remain exempt from whatever regulation is eventually in place, many predict that the benefits of exemption will be short-lived. Soon, they believe, trickle-down effects will have an impact on even the smallest FIs.

Even with regulation still up in the air, community FIs are wise to continue investing time and energy in the optimization of their debit programs. Strategies designed to increase transactions and cut costs not only help in the near term, but also set the portfolio up for success even after the effects of interchange regulation are felt.

Below are two strategies community FIs should consider:

1) Know your customers

Within the Shazam Network, the heaviest debit users are 18–22 years old and use their debit cards 22–30 times a month. These numbers mirror much of the larger debit universe.

If a community FI knows and understands the demographics of its customers, leaders can better target their marketing efforts to the right cardholders for sustainable success.

This 18–22-year-old demographic, in particular, is a high-value target for FIs. Ignoring this group because they have low balances is a mistake. Over time, these customers will earn considerably more income, get married, buy a house and ultimately look to FIs for loans and other financial products.

Given this predictable increase in engagement, community FIs should work with their core system providers to know and understand how this group in particular is using the institution’s products. Because many 18–22-year-olds use their debit cards as their primary source of payment, the debit portfolio is a great place to start when looking to study the behaviors and preferences of this important group.

2) Reduce expenses with smart routing

Recent economic conditions and regulatory changes have led electronic funds transfer processors to implement a variety of strategies to keep debit card transactions coming their way.

Building strong relationships with these partners will allow community FIs not only to know how that processor is routing transactions; but also will apprise them of any incentives that processor offers.

What’s more, these vendor partners are often aware of cutting-edge optimization strategies, providing further reason for FIs to stay engaged with their EFT processor.

Next month, I will highlight two additional strategies community FIs should consider for optimizing their debit card programs.

This blog is a modified excerpt from an article originally published by CBinsight.

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