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04:17 PM
Bill Dinker, EFT Source
Bill Dinker, EFT Source

Instant Issuance: A Game-Changer for Banks

Instant card issuance technology provides a means for banks to quickly increase their volume of debit card payments at a time when debit is increasingly popular.

The traditional business strategies previously enjoyed by banks have been lost in response to changing regulation and the changing needs of their customers. Acquiring profitable account holders and retaining them has become harder than ever, forcing organizations to constantly reevaluate their current methods. The changes that accompanied the Dodd-Frank Reform Act have made this especially true to as it relates to payments. And today’s consumers want their financial institution to offer services that align with their lifestyle, including great service, options and convenience.

According to a recent Federal Reserve Payments Study, annual debit card payments have continued to increase by double-digits and now account for 34.8 percent of noncash payments. This growth indicates a dramatic decline in the use of cash and checks as consumers embrace more card-based payment methods.

Consequently, debit card marketing is on the rise according to Mintel Comperemedia – creating more competitive pressure. It is reported that financial institutions mailed out 42 million direct mail offers last year, up 6% from 2011. Brian Riley, a senior research director for CEB TowerGroup, explained in a recent Time Magazine article that banks are trying to make up for the decrease in the amount collected per fee with increased volume. “You need economies of scale” to make today’s debit-based business model work. With this increased focus on debit cards, it is critical for financial institutions to implement a business model that differentiates them from the competition.

The success of card-based payment methods presents an opportunity for banks to create true differentiation for themselves amongst the competition. To stand out, financial institutions must incorporate innovative strategies and advanced technologies, like instant issuance of payment cards, into their card programs.

The process of personalizing, mailing, and activating cards associated with centralized issuance can take up to 10 days. Instant issuance enables new and existing customers to walk into a branch and, within seconds, receive a fully-functioning, active payment card. Thus, creating opportunities to increase activation rates and interchange revenue. The sooner the card is used, the faster financial institutions can benefit from an immediate return on their investment. A recent analysis of one bank’s use of instant issuance showed customers use their cards, on average, within the first 8 hours of receiving the card.

With instant issuance, financial institutions use their existing software to transfer data to a third-party provider. The data is immediately processed and converted into an encrypted print file that is sent back to the branch electronically. Small, desktop printers encode the data and print the card onsite.

Instant issuance processes share many elements of traditional, centralized card issuance and integrates into existing infrastructure. This allows financial institutions who already have central issuance infrastructures in place to simply expand and add instant issuance at the branch level - without making a large investment of money or resources.

When evaluating instant issuance, banks should only work with providers that are Payment Card Industry Data Security Standards (PCI DSS) certified to ensure that all data is encrypted and securely transmitted between the bank’s printer and the third-party provider. Additionally, financial institutions should only install printers that meet security guidelines of card brands, including a locking system to prevent unauthorized access to blank cards and the printing ribbon.

By printing personalized, ready-to-use cards within minutes of opening an account, cardholders experience a much more positive interaction with branch employees, improving overall satisfaction levels and customer loyalty. In addition, because there is typically little training required to operate a card printing device, customers rarely encounter problems related to a learning curve, which may be encountered with other branch services.

Game Changing Benefits

- Improved customer experience: Account holders receive personalized cards immediately, without waiting days or weeks for the card to arrive in the mail.

- Competitive advantage: Instant issuance delivers speed, convenience, and value to cardholders, services that align with their lifestyle.

- Reduced costs: With instant issuance, institutions no longer need to issue temporary cards or handle ‘rushed’ card orders, eliminating expenses typically associated with packaging and shipping and handling.

- Enhanced security: Advanced technologies make instant issuance fully compliant with security requirements while reducing the risk of cards being lost or stolen in the mail.

- Revenue opportunities: Offering an “instant” solution for a small fee has created additional revenue streams for some institutions, thus turning branches into profit centers.

As consumer preferences evolve and new channels emerge, bankers must consider the role of its branches and with the emergence of instant card issuance. A game-changer for financial institutions, instant issuance offers a great opportunity to transform the branch into a super customer service center, thus improving customer loyalty and profitability.

Bill Dinker is president of EFT Source, provider of the patented Card@Once service, an instant issuance solution for financial institutions.

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