The recent explosion of POS debit cards, especially VISA and MasterCard branded off-line debit cards, is creating a bookkeeping nightmare for some consumers and product confusion for others. The findings come from recent studies conducted by BAIGlobal which found many cardholders struggling to keep track of cash flow and balances in their accounts. As a result cardholders are trying to track their funds in a variety of creative ways, including “back-of-the-envelope” ledger systems and daily calls to issuers 800-number customer service lines. The study also uncovered consumer confusion where issuers had converted private label ATM cards to branded debit cards using the VISA or MasterCard logo. BAIGlobal says the VISA and MasterCard brand are synonymous with credit cards, and cardholders have an adjustment to make when they see these brands now on debit cards. In some cases the company found cardholders who thought they had a hybrid credit/debit card. The study concludes that despite problems within the debit card marketplace there is significant opportunity for growth. BAIGlobal says while debit cards penetrated nearly two of three households, cards are linked to only one third of all the households financial accounts, meaning debit cards have the potential to be linked to other accounts. The firm estimates most consumers have 2.7 financial relationships on average.
Troubles within the U.S. debit card marketplace are now surfacing because of two major problems, according to recent studies from BAIGlobal, Inc., the market research firm headquartered in Tarrytown, N.Y.
One major problem is that cardholders are having significant difficulty tracking and controlling funds. The other problem stems from consumer confusion caused by the introduction of VISA/MasterCard branded debit cards.
“The use of debit cards has become an accepted payment method, with two of the three households owning a debit card,” said Claire Peerson Braverman, senior vice president of BAIGlobal. “But the expansion of debit card use, from cash access to direct merchandise purchase, has disrupted cardholders usual methods of record-keeping and control. Their checkbook register just doesnt do the job anymore. People literally dont know how much money they have.”
BAIGlobals studies found many cardholders struggling to keep track of cash flow and balances in their accounts. The variety of ways to access an account whether it be via check, direct deposit or withdrawal, on-line banking or debit card coupled with many accounts having multiple users within the family, makes it almost impossible to keep the old-style checkbook register up-to-date.
While debit cards are still used mostly for ATM cash withdrawals (66 percent of households with debit cards used them this way on a monthly basis), usage for merchandise purchases was also common, as 40 percent of households with debit cards used them monthly for merchandise purchases, according to BAIGlobals studies. Grocery stores, gas stations and discount stores were the most common types of establishments where purchases were made.
Card Issuers Vulnerable to Increased Costs
BAIGlobal studies also found cardholders trying to track their funds in a variety of creative ways, including “back-of-the-envelope” ledger systems and daily calls to issuers 800-number customer service lines.
“One cardholder, who made daily 800-number calls to track her balances; jokingly called her system 1-800-Call-My-Bank,” said Braverman. “If consumers lack a better way to track their funds, theres the potential for issuers inbound telephone call volume and related costs to soar.”
The upside for issuers is that this also offers them a new product or service opportunity. “Whoever can provide a better means for cardholders to gain control over their funds will be able to differentiate themselves from the competition and capture cardholder loyalty,” Braverman said.
Branded Debit Cards Cause Confusion Too
The BAIGlobal studies also uncovered consumer confusion where issuers had converted private label ATM cards to branded debit cards using the VISA or MasterCard logo. In fact, two thirds of newly mailed debit cards carried one of these logos, the studies revealed.
“VISA and MasterCard are powerful brands in the marketplace and are nearly synonymous with credit cards,” said Braverman. “Cardholders have an adjustment to make when they see these brands now on debit cards. In some cases we found cardholders who thought they had a hybrid credit/debit card. Issuers have to be especially careful to explain the distinction.”
Still Room for Debit Card Growth
Despite problems within the debit card marketplace, opportunity for the industrys growth exists, the BAIGlobal studies highlighted. While debit cards penetrated nearly two of three households, cards are linked to only one third of all the households financial accounts, meaning debit cards have the potential to be linked to other accounts.
“Most consumers have multiple financial relationships 2.7 relationships on average,” concluded Braverman. “If consumers take on one debit card for each relationship, the share of wallet devoted to debit cards can increase greatly.”
Founded in 1969, BAIGlobal is a full-service, international market research firm. Its clients include a broad list of major companies and financial institutions in the U.S. and around the world. BAIGlobal offers Mail Monitor and Inside Track competitive tracking services for the credit card industry. The firm is an independent subsidiary of Market Facts Inc., Arlington Heights, Ill., one of the nations largest market research firms.