Financial institutions offering instant debit card issuance in their branches reap benefits in terms of higher card activation rates and higher interchange fees, Robin Arnfield reports.
According to Aite Group senior analyst Tiffani Montez’s report “Instant Issuance: U.S. Current State Assessment,” at the end of 2016, 2,715 US financial institutions (FIs) had implemented instant issuance across 40,771 branches.
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This amounted to 23% of total FIs in the US.
The report predicts that, by the end of 2017, some 3,312 FIs will have implemented instant issuance at 46,444 branches in the US. By 2021, this number will increase to 5,483 FIs at 67,075 branches, representing 55% market adoption across FIs in the US, it says.
Montez estimates that 39% of US banks with over $10 billion in assets have adopted instant issuance, which will put pressure on smaller FIs to adopt the technology.
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By GlobalDataMontez says the majority of FIs offering instance issuance just do so for debit, not credit cards. “This is partly due to fraud prevention and because they started instantly issuing debit as pilots and some will eventually start issuing credit cards in branches, while others are holding out for digital credit card issuance,” she tells CI.
“This means sending a virtual credit card direct to a mobile wallet (and then mailing the plastic card). No-one’s really doing digital issuance yet, although it’s on everyone’s roadmap, and solutions will start to appear in the market over the next few years. But consumers have to be ready and willing to use digital debit and digital credit cards.”
Montez says FIs have found that it is more expensive to issue cards in branches than in the mail, but that the customer satisfaction far outweighs the cost of in-branch issuance. “It’s also about getting a card activated in front of someone so they don’t stick an unactivated card in a drawer or delay a few days before activating,” she says.
“Also, when you bring people into a branch, you can talk them through digital services like mobile banking and explain product features such as overdraft protection or reward programmes.”
Montez says instant issuance won’t rise beyond 55% penetration in the US market by 2021, as digital issuance solutions will be rolled out over the next few years and there will be less need for instant issuance.
Chase
To the US banking industry’s surprise, Chase discontinued its in-branch instant debit card issuance programme in 2017. Chase was one of the first US banks to introduce instant card issuance in 2012. Other US banks such as TD Bank and PNC continue to offer instant debit card issuance, while Wells Fargo offers temporary non-personalised debit cards in its branches.
“We offer instant issue debit and credit cards across our 1,200+ US locations,” a TD Bank spokesperson tells CI.
“There was a lot of speculation about why Chase discontinued its instant card issuance programme,” says Montez. “It sounds like it had more to do with cost. But Chase’s move went against a strategic trend and what consumers expect.”
The Wall Street Journal reported that Chase had experienced fraudulent claims for instantly issued debit cards in its branches from people with false IDs. However, a Chase spokesperson tells CI that this issue was resolved.
“We found the issue and fixed the process almost two years ago, virtually eliminating the problem, and well before we decided to stop offering the service,” she says.
Chase says that, if customers lose their card, they can have a temporary ATM-only card printed at the branch or use a human teller for withdrawing or depositing cash. They can also pay a small fee to have a new card sent to them within 48 hours, if they don’t want to wait.
CPI Card Group
CPI Card Group offers the Card@Once® in-branch personalised card issuance platform. “Branches offering instant issue debit and credit cards eliminate the delay associated with postal delivery in instances of new accounts and compromised, lost or stolen cards,” says Rob Dixon, the firm’s Product Director for Instant Issuance
“Also, they allow customers to use their card immediately, increasing card usage and interchange revenue. Card@Once® isn’t currently provided (outside the US) internationally except at some FIs that serve military bases across the globe. Currently, we have over 1,100 banks and credit unions actively using Card@Once® across over 5,100 branches.”
Dixon says that individual FIs offering instant issuance need to implement effective ID authentication procedures to ensure they issue cards to the correct cardholders. “The Card@Once® application has reporting that can be leveraged to assist programme managers to identify potential fraudulent activity,” he says. “But the identification policies reside with the bank/credit union.”
“The majority of our customers report that they experience operational savings from instant issuance, but these are hard to estimate with the variance in card types and fulfillment costs,” Dixon says. “Traditionally. FIs have viewed their instant issuance programmes from a traditional business case perspective: increased revenue through higher activation and usage of the cards issued and top of wallet position.”
With consumers demanding convenience and higher security, FIs are starting to see the benefit of instant issuance shift from those traditional drivers to being able provide a product via the branch that satisfies those customers’ demands, Dixon says.
“Our (US) customers have seen their instant issuance programs ease their customers through the EMV transition by providing the FI with the opportunity to educate cardholders on why a chip has been added (higher security) and how to use it (dip it, not swipe it).
In addition, instant issuance has provided FIs with the ability to respond in real time to security breaches at a time when those events are at historic highs. Not only is instant issuance of benefit in the traditional increased revenue sense, it helps the bottom-line by minimising card portfolio attrition caused by changes in technology due to fraud-related events outside the control of the issuing FI.”
Dixon says that the ability to issue virtual credentials at the same time as issuing physical credentials has natural synergies to the traditional instant issuance value proposition. “As mobile wallets and ‘tap and go’ contactless payments catch on in the US, we anticipate the demand for virtual card issuance within instant issuance programmes to rise,” he says.
Fiserv
US banking software vendor Fiserv offers a platform called Instant Issue Advantage: Tablet, which lets FIs issue Visa- or Mastercard-branded mag-stripe or EMV debit or credit cards using tablets. It also offers a desktop PC-based instant issuance solution for FIs.
According to Fiserv’s US 2016 consumer research, only 63% of cards are activated on the day they arrive in the mail. Also, the majority of cards that are activated at home aren’t used in the first 30 days, Fiserv says.
This means that the cardholder activates the card when they receive it, but they don’t put it into their wallet and start using it,” says Sharon Pazlar, Director of Fiserv’s Output Solutions. “When a card is activated in the branch, the customer can go next door immediately and start using it for purchases. If a card isn’t used, then the bank isn’t getting any interchange revenue on that card. We’ve found from surveys that cards instantly issued in branches have a higher transaction volume than cards activated at home”
Pazlar says the cost of instant issuance technology can be offset by additional products and services sold to customers who come into a branch to activate their card. “Our research also found that 47% of consumers we interviewed said it would be very important to get their card form their branch and 36% said instant issuance would influence where they bank,” she says.
Pazlar says that Rochester, Minnesota-based First Alliance Credit Union has found that, by deploying Fiserv’s tablet-based instant issuance technology, it brings more millennial customers into its branches.
“First Alliance gives the instant issuance tablets to concierges who greet customers when they come into the branch,” she says. “If the customer needs to activate a card, then they will sit down with the concierge in a living room-style environment in the front of the branch.”
