The Next Big Thing in Cards - Co-Branded Decoupled Debit Cards
The Aite Group has announced a new report titled "The Next Big Thing in Cards: Co-Branded Decoupled Debit Cards" that examines Capital One's recent launch of a MasterCard decoupled debit card - calling it "a major breakthrough in card issuing." Aite Group views the product as squarely taking on deposit institutions, and predicts it will have a long-lasting impact on both the card and banking industries. See also Payments News' earlier coverage of this innovative new product.
The report asserts that the product's likelihood of success is very high and that the product will cause ripple effects well beyond the merchant co-brand segment. Aite Group views the product's reward proposition, which will give consumers two to five times the actual value of traditional reward debit cards, as a key competitive force.
"Incumbent deposit institutions will need to react to the risk of disintermediation as their business model, which is based on punitive fees and interchange income, comes under pressure," says Gwenn Bézard, research director at Aite Group and author of the report.
"Decoupled debit cards will also expose Visa, MasterCard, and incumbent EFT networks to new competition from the likes of American Express and Discover in the debit arena," predicts Bézard. Aite Group anticipates that competition on rewards will force major financial institutions to accelerate their shift to enterprise rewards to resist consumers' cherry-picking of the debit card product.
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