This article originally published in Self-Service World magazine Nov/Dec 2006's FOCUS on financial self-service.
Cards are everywhere. Consumers have come to rely on them, and so have many financial institutions (FIs). It's not hard to make a debit-card program successful, but making it lucrative can be a challenge, especially for small to mid-tier FIs.
"Most financial institutions don't track their programs, and most don't have the resources to market them either," said Peter Kulik, electronic-funds-transfer product manager for Cincinnati-based Fifth Third Processing Solutions, one of the top-five transaction processors among U.S. FIs.
Fifth Third's Debit Card Portfolio Management program, which Fifth Third launched nearly a decade ago, is designed to help banks and credit unions analyze and market their debit programs. The program targets the industry's smaller players, since most don't have the time or resources to invest in debit-product management, Kulik said.
The program focuses on three metrics: penetration, card-activation rate and usage rate. With those metrics, Fifth Third can benchmark annual interchange-revenue growth — the money-making key for all debit-card programs.
In March 2003, First National Bank of Olathe signed up for the service. The Kansas-based community bank with $750 million in assets didn't have the expertise or budget to develop and market a large debit program, says Kathy Walker, the bank's vice president of deposit operations.
"Since we signed up for the program with Fifth Third, we've seen an 85 percent increase in our transactions," she said. "Why the growth? I think some of it is because we're acquiring new customers and we've also had response to the consumer-debit-acquisition program we did in February. We're looking for about $25,000 in incremental interchange revenue just from that one mailing."
Beyond the 85-percent increase in transaction volume, since March 2003 when First National first started issuing debit cards, its sales volume is up 71 percent, the bank's number of active cards — those that perform at least one signature-based transaction in a month — is up 49 percent, activation is up 33 percent, and usage is up 34 percent.
The program only measures signature-based transactions, said Lesley DeCator, Fifth Third Processing Solutions' assistant vice president, because signature brings in the majority of the revenue. PIN-debit programs bring in only a third of the revenue signature programs generate. The average interchange rate for a signature-based transaction is about 54 cents.
A marketing message
What makes the program unique, at least in Walker's and DeCator's eyes, is the marketing. With the analytical information Fifth Third collects, it guides its FI clients toward marketing campaigns that will help them increase performance.
"All you need to do is take a snapshot, and we do a year-over-year comparison," DeCator said.
For Walker and her crew at First National, that simplicity is a program selling point.
"I feel like I do very little with the program," Walker said. "We talk about what we want to accomplish and then Fifth Third provides us with very customizable marketing pieces. We customize the feel and then Fifth Third sends it out."
To help FIs with their customized messages, Fifth Third in September launched Fifth Third Marketing Direct, a Web site that allows Fifth Third clients to customize their own marketing campaigns.
"It's easy for FIs to use," Kulik said. "They can add their logo and customize all of their marketing materials and send them out directly. It's made the process very efficient, and it gives FIs more control."
