Debit issuers today face several challenges, including flat or declining card bases, the continual threat of fraud and rising digital demand. These issues can also present opportunities. Issuers can create best-in-class debit programs by applying best practices in three areas: digital demand, the transaction experience and key performance indicators.

Moreover, an issuer’s marketing program can help to reinforce these enhancements. By focusing on three key areas — digital capabilities, the customer experience and debit program performance — issuers can best respond to today’s challenges.

Digital Demand

Mobile and card-not-present (CNP) debit transactions continue to gain popularity with cardholders. CNP transactions now account for over one-third of POS debit transactions and nearly half of debit spending, according to the 2024 PULSE Debit Issuer Study.

And consumers show a strong preference for debit over alternative payment methods. A Discover-sponsored survey by Datos Insights revealed that 66% of consumers report using debit at least weekly and 79% at least monthly. Similarly, 30% use a digital wallet linked to their debit card at least weekly and 48% do so at least monthly.

Younger- and higher-income consumers make more contactless and digital wallet transactions, so enabling digital payment capabilities — merchant wallets, in-app purchases, recurring card-on-file payments and wearable devices — can attract high-usage cardholders.

Most institutions now support digital provisioning, enabling consumers to add their debit card to a digital wallet. However, increasingly, issuers are also offering digital instant issuance, in which debit card credentials are pushed directly into the consumer’s digital wallet for immediate access. This enables new and existing customers with lost or stolen cards to use their new payment credentials right away. In addition to improved customer satisfaction, the institution saves on rush-shipping new plastic cards.

Transaction Experience

Fraud — especially CNP fraud — continues to threaten cardholders and debit programs. It is critical to constantly evaluate and modify fraud models to minimize losses while not compromising a positive and seamless transaction experience. This involves balancing high authorization rates against low fraud losses.

With CNP transactions continuing to take share from card-present (CP) purchases, issuer authorization rates are experiencing downward pressure. Participants in the 2024 Debit Issuer Study indicated that 81% of their declined transactions were CNP.

Optimizing your institution’s fraud-detection and risk-mitigation strategy requires evaluating your program with fraud analysts to refine rules, tools and processes for CNP transactions. This approach is particularly important for CNP activity, but it also applies to CP transactions.

Your institution may already leverage fraud-detection solutions from your processor. However, utilizing multiple solutions from various partners — including your payment network — provides a layered approach to fraud prevention.

Program Performance

A key component of optimizing your debit program is prioritizing the key performance indicators (KPIs): penetration, active and usage (PAU) rates.

• Penetration Rate: The percentage of accounts that can be accessed by a debit card.
• Active Rate: The percentage of issued cards used for a POS transaction in the last 30 days.
• Usage Rate: The number of monthly transactions per active card.

The 2024 Debit Issuer Study revealed that almost 84% of account holders have a debit card, and nearly 74% are active debit users. While the average institution sees a usage rate of 30.7 POS transactions per month, best-in-class institutions have active cardholders who make more than 32 transactions per month.

Prioritizing PAU management can help you increase debit transactions and spending, thus growing revenue for your institution. Issuers with best-in-class PAU performance offer instant digital issuance, support a smooth onboarding process and execute lifecycle marketing strategies to drive usage.

Effective Marketing Underpins High Performance

Effective marketing can help support the development of best-in-class debit programs. The following are some guiding principles:

• Increasing Penetration is Job No. 1: The average issuer has plenty of room for improvement in the most vital of the KPIs — penetration. For both consumer and commercial customers, a debit card should be issued automatically at the time of account opening. Another way to boost the penetration rate is to highlight the convenience, security and functionality of the debit card as part of your new account acquisition strategy. Lastly, analyze your existing account base to identify segments that do not have a card and conduct targeted outreach campaigns that educate account holders on the advantages of debit.
• Prioritize Card Activation: When account holders open the envelope containing their debit card, the goal is to get them to activate the card and set a PIN immediately. The path to activation must be clear, simple and frictionless. Offer the option of going online or to your mobile app to activate the card.
• Onboard for Top-of-Wallet Status: Once a consumer account holder activates their card, have a plan to encourage use through frequent communications. Focus your messaging on how your card’s features can solve customer problems and make their lives easier. For example, highlight the benefits of contactless card functionality. If the card is compatible with digital wallets, tell customers how to add it to their preferred wallet or communicate the ease and convenience of card-on-file and recurring payments.
• Focus Your Marketing Messages: Keep messages to cardholders short by focusing on a single feature or benefit. Shorter, more frequent messages drive more meaningful engagement than less frequent, lengthier attempts. Also, segment your audience and customize message frequency based on customer behavior, engagement levels, demographics and preferences. For example, active users need fewer reminders than inactive ones. Focus your efforts on portfolio segments that will deliver growth. Prioritize outreach to active cardholders and younger, tech-savvy generations.
• Meet Customers Where They Are: Should you use email, direct mail or text messages? The answer is “Yes” to all. To communicate more frequently without inconveniencing cardholders, vary the channel. As texting has cemented its status as a primary communication channel in many aspects of our lives, consumers are increasingly open to text communication with companies. SMS (short message service) marketing works. This type of text message has a 98% open rate, according to a September 2024 blog post from Textellent. The key is to test new approaches and apply learnings.

Being cognizant of consumer trends, capitalizing on new digital payment demand, prioritizing effective fraud-mitigation strategies, and working to refine your approach to PAU can position your institution to scale your debit portfolio and achieve best-in-class status.