A new report from Aite Group, LLC, examines the introduction of a new type of debit card product by Capital One — a co-branded decoupled debit card.
The report asserts that the product’s likelihood of success is very high and that the product will cause ripple effects well beyond the merchant co-brand segment. Aite Group views the product’s reward proposition, which will give consumers two to five times the actual value of traditional reward debit cards, as a key competitive force.
“Incumbent deposit institutions will need to react to the risk of disintermediation as their business model, which is based on punitive fees and interchange income, comes under pressure,” says Gwenn Bzard, research director at Aite Group and author of the report. “Decoupled debit cards will also expose Visa, MasterCard and incumbent EFT networks to new competition from the likes of American Express and Discover in the debit arena.”
Aite Group anticipates competition on rewards will force major financial institutions to accelerate their shift to enterprise rewards to resist consumers’ cherry-picking of the debit card product, it said in a statement.