Decoupled Debit Cards- What?
For a minute, lets imagine a new debit card in your wallet. This new debit card is just like all the others; it looks like a credit card; you swipe it like a credit card. But, different than the others, it's not associated with a specific bank account. Instead, you tell the issuer of the card, say Capital One for example, which checking account you want the money to come from. This new debit card is like a universal debit card that you link to all of your many different checking accounts. So now instead of having a pocket full of debit cards, you have only one.
Okay, let's wake up! Day dream is over! Back to reality.
What if this dream were reality? What if I told you it IS reality?
Capital One bank has quietly been piloting this new debit card for almost a year now.
As reported on PaymentNews;
"Having quietly tested the cards via direct marketing with their own credit card customers earlier in the year, Capital One says it now has its first co-brand debit pilot in market with in-store kiosk, Internet and phone-based enrollment. It says it plans for a second merchant client to launch its pilot this summer and for an affinity client to launch in the third quarter.
With this new debit card, Capital One will offer awards with every purchase! Whether you're using the card to pay for groceries, credit card bills, or to purchase gasoline, you might earn points or other rewards from the issuer. Gwenn Bezard of Aite Groupe says..
"There's a huge difference between the rewards programs of credit cards and debit cards. The actual value received by the customer is 64 cents for every $100 spent with a credit card, while the value received for a debit card program is 10 cents. The actual value that a customer will receive (with the Capital One MasterCard) is expected to be between 40 cents and 60 cents. That's four to five times higher than the typical debit rewards card."
What's in it for Capital One? They earn income know as 'interchange' for each transaction that you complete. Gwen Bezard describes in a report by research firm the Aite Groupe that decoupled debit cars will be a "direct assault against incumbent deposit financial institutions." This means that many banks risk losing HUGE amounts of income to Capital One. If this pans out as Capital One hopes, it will redefine the bankers view of interchange income. Not only would the banks lose the interchange, they'd still have to pay for the processing charges, further damaging their income. Processing includes handling disputes and error resolutions, insufficient fund issues, and ACH transaction fees.
Here's a short video on US Banker, the Lowdown on Decoupled Debit Cards.
Want more info? Read this article at Smartmoney.
Keep your eyes open! If a decoupled Capital One debit card sounds good to you, you'll have to wait until you receive an invitation. Spend a few minutes searching online and you will find their application to enroll, but you need a reference code that per Capital One, you can only receive by invitation.
If you want to call Capital One for more information, their phone number is 1-866-833-9233.