Momentum Behind Discover Debit Means More Choice For Issuers
Competition and choice are essential to a healthy market, and the signature debit space is no exception. However, limited choice in a market traditionally dominated by two providers has exacerbated an already challenging debit environment for financial institutions.
Issuers benefit from increased competition in the signature debit market. That’s why the recent endorsement of Discover Debit by the American Bankers Association – through its subsidiary the Corporation for American Banking – as the signature debit brand of choice for its members is a positive development for all financial institutions.
The ABA endorsement shines a spotlight on this alternative to the status quo providers, one that offers superior value to issuers of all sizes.
“Our members are fast realizing that Discover Debit delivers the same acceptance as the other networks at a much lower cost to the issuer,” said William Kroll, executive vice president at the ABA. “The program’s straightforward billing, ease of use and lower network fees makes this a significant alternative for ABA members and is good for the banking industry as a whole.”
The ABA’s endorsement of Discover Debit as an option to the traditional signature networks comes at a time when changes occurring in debit are posing challenges for financial institutions and squeezing the profitability of their debit programs.
Regulations capping interchange fees for large institutions and mandating merchant control of transaction routing have led to reductions in interchange revenue for issuers large and small. In addition, new mandates by the traditional signature providers have resulted in the routing of PIN transactions to those networks rather than the issuer’s chosen PIN network. Because of these mandates, issuers are less able to optimize their network relationships.
In addition to regulatory pressures and anti-competitive mandates, recent high-profile data breaches and the cost of fraud to financial institutions have made payments security a top priority. And with financial institutions already contemplating card reissuance as they transition to EMV, there are more reasons than ever to reassess debit programs.
While issuers grapple with a changing payments landscape, consumer preference for paying with debit means this offering remains a strategic focus for banks and credit unions. As the primary customer touch point for financial institutions, debit is issuers’ doorway to growing relationships with account holders.
Addressing these challenges requires a competitive signature debit market where issuers get choices instead of mandates. In a space long overdue for disruption, the ABA’s high-profile endorsement of Discover Debit lends new prominence to the program – one that puts issuers’ needs first.
The Discover Debit approach is built on four principles:
- Improved profitability through competitive interchange and lower fees
- Simplified operating rules and fee transparency
- Comprehensive fraud mitigation, featuring real-time alerting and authorization blocking
- Unmatched program flexibility allowing issuers to feature their own brands
When a financial institution switches to Discover Debit, it gains an experienced provider that works to guide the implementation and reissue process, including marketing support designed to increase card activation and usage.