R. C. Giltner Services
Companion Card Strategy to Serve
Customer Security and Transaction Needs
February 11, 2014
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Contents
• Introduction
• Market Drivers of the Consumer Need for a
Companion Card
• Companion Card Branding and Features
• Sales Approach
• Payoff and Next Steps
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Introduction
Community and regional banks can serve a growing market
through a companion card, added to the current debit card,
to enhance transaction security and functionality.
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Introduction
The Companion Card is simply a checking account with a
“opt out” debit card linked in online banking.
PaySoundSM Companion Card
–
–
–
–
Checking account set up.
Debit card only.
No bill pay or ACH debits.
No NSF/OD fees; mandatory
opt out.
– $1.00 fee per check if written.
– Fee for ACH; checks
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Introduction
Key market drivers for consumer demand for a “companion
card” are:
a) New capability to transact with alternatives that
settle to a bank account.
b) Concerns about security and compromised cards
with shopping risk.
c) Growth of mainstream prepaid for specialized use.
d) Growth of online shopping.
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a) New Payment Capabilities
We are losing revenue from our customers using
alternative payment methods that settle to our accounts.
Payment Networks:
(PayPal, Google, Dwolla)
Aggregators
(BillFloat, PinPoint,
Mint, BillMyParents, Banno)
$
$
Acct Contextual Value
FI Checking Acct
• Revenue
• Relationship
• Risk
• Regulatory
Compliance (ID)
$
Billers and Services
(Online/Phone Payment;
Manilla, Doxo, Volly)
$
Merchants
(Walmart, Target,
Home Depot)
$
Telephone
(Isis, Boku, Verizon, AT&T (decoupled debit)
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3. “Payment Context” Drives Revenue
Banks need to think of providing payment methods for
specific transaction types.
“In-store payments are PayPal’s to
lose…” Don Kingsborough, PayPal
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a) New Payment Capabilities
The alternatives are growing for settlement, creating a leaky
account. Today we tell our customers, as do others, where
to not use their debit card, the primary transaction device we
provide.
Checking’s Leaky Account
Checks $
Debit Card
PayPal & Alt.
PrePaid
Web/ARC/POP ACH
Total
$
$
$
$
$
$
$
5,400
1,563
225
250
590
8,028
%
67%
19%
3%
3%
7%
100%
#
14.5
39.8
5.6
4.8
5.8
70.5
%
21%
56%
8%
7%
8%
100%
Remember, losing a debit transaction costs more than just interchange:
• Interchange loss (net, exempt banks)
$.26
• NSF/OD fee (2% of transactions)
$.60
Total
$.86
Source: Our Analysis, Industry and NACHA Data
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a) New Payment Capabilities
Use of alternative payment methods, such as prepaid or
PayPal, are already used as a “companion” to checking.
Prepaid Card User Survey
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b) Concerns About Security and Shopping Risk
68% of consumers are concerned by card use
compromised by fraud and identity theft.
Source: Unisys Corp.
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c) Growth in Mainstream Prepaid for Specialized Use
GPR prepaid use is growing 30%+ a year and penetrating all
segments, serving over 10% of households.
Source: The Wall Street Journal
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c) Growth in Mainstream Prepaid for Specialized Use
Prepaid Cards
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c) Growth in Mainstream Prepaid for Specialized Use
The benefits driving the growth of “prepaid” can be
provided in a checking account:
• No overdraft fees ever. (73%)* (positions Reg E
opt out as a benefit)
• Control over spending. (58%)*
• Retail access for loading.
• Second chance options where CheckSystems
scores are low.
* Analysis of GPR Branded Prepaid Cards, Bretton Woods, 2012
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d) Growth in Online Purchases
Online retail sales are growing rapidly.
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The Need for A Companion Card
Consumers need a second or companion card for
specialized transactions.
Transaction Segments
Consumer Needs
Payment Methods
Online Shopping
• Protection if card stolen
• Spending control
• Avoid Overdraft fees
Shopping/ Travel
Control
• Protection if card stolen
• Spending/charge control
• Avoid Overdraft fees
Youth Spending
• Card for youth
• Avoid Overdraft fees
• Prepaid
• Separate account
• Prepaid
Partition Funds for
Target Payment
• Credit Card
• PayPal, Alt.
• Prepaid
• Prepaid
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Companion Card Branding and Features
The Companion Card with payments branding serves
customer needs or a small business payroll card for $5.95
per month.
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Companion Card Branding and Features
“Payments” branding should be employed rather than
checking branding.
Checking Accounts
Payments Services
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Companion Card Branding and Features
A premium companion card for $14.95/ mo. includes:
• Multiple companion cards.
• Higher spending limits.
• Lifelock identity theft protection (see their program
at http://www.lifelockbusinesssolutions.com/introduce-lifelock/texas-bank-chooseslifelock-to-protect-customers-and-attract-new-ones/)
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Companion Card Branding and Features
FIs should be aware that some authorities doubt the benefit
of LifeLock and others.
The bottom line
Protect yourself for less. Monitor your financial
statements and credit reports for suspicious
activity that can lead to identity theft.
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At $120 a year, it's just not worth it
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Companion Card Branding and Features
A better approach may be to provide the Companion Card
so the customer can protect their main account, and
access to credit information and management.
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Companion Card Branding and Features
The sales approach fits with your current approach by
adding a question:
Would you like to customize your account with a
companion card that allows you to:
• Shop without concern that your card information could be
stolen.
• Shop online.
• Use for travel, for youth or to hand to your domestic service
providers.
• No overdraft fees ever.
• A card to load and unload quickly and easily from online
banking.
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Payoff: 9% Service Charge Growth
The revenue model shows growth in service charge
revenue of 9%.
Companion Card Fee Revenue Increase
Monthly Net Fee
Annual Fees
Added Inchg/Fees
Companion Premium
$
5.95 $
7.95
$
71.40 $
95.40
$
26.00 $
26.00
Total Fees/Card
$
97.40 $
Penetration
8%
Added Fees/Acct-All Accts $
7.79 $
Industry Average Svc Chg Fees/Acct
% Increase
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Total
121.40
3%
3.64 $ 11.43
$128
9%
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