Debit Cards Breed Bank Loyalty

A recent study by Phoenix Payments Research confirms what the industry has begun to realize--that debit cards engender more loyalty among bank customers versus credit cards.The report states that only 30 percent of consumers hold their main credit card with their primary financial institution. Debit cards, by virtue of the fact that they are linked to a checking account, are, therefore, more likely to be associated with a customer's bank account and financial institution.

The researchers urge banks to use debit as a way to maintain loyal customers and perhaps lure them into giving their credit card business to the bank as well. Definitely a strategy that makes sense, but could this be a short-lived phenomenon as nontraditional financial services providers step in with new ideas?

Recently, the idea of decoupled debit cards--debit cards that are not associated with a checking account at a bank--has begun to take hold in the card industry. CapitalOne launched such a product in which it is using ties to the ACH system to enable debit transactions. CapOne customers could have a credit and debit card with that issuer/bank and potentially have all their rewards tied together as well.

A definite convenience to consumers for anyone able to pull this off, but yet another looming threat about which banks will need to be mindful if they wish to stay competitive.