In last month’s blog, PRI’s Mike Holt, discussed how increasing debit card penetration into accounts improves FI profitability. Now we will take a closer look at the second element of an FI’s PAU – debit card activation.
Activation is measured as the percentage of open debit cards with at least one point-of-sale (POS) purchase over the previous 30-day period. “Active” cards, in other words, are debit cards that are used to purchase something each and every month. This metric does not include cards that are used exclusively to conduct ATM transactions, which typically make up only 3 to 4 percent of an FI’s entire cardholder base.
“Keep in mind that ‘activated’ is not the same as ‘active’ here,” Holt said. “An activated card is one that is turned on or activated in order to complete transactions, a function mainly controlled at account opening. Active for PAU purposes means the card is being used to make purchases.”
The first activation point at account opening is critical, but it can also be achieved on typical Retail 2x2x2 efforts, or whatever cadence has been established for new account follow up. Cards should be activated at the new account desk if instant issued. If issued during online opening or sent via US mail, the FI can set automated email reminders until the card is activated and used.
Activation is controlled or increased in much the same way as utilization, which will be our next topic in this series.
“Improvement in these two areas is accomplished by giving every kind of cardholder a reason to pull out the debit card and use it,” Holt said. “Some improvement can be controlled at the time of account opening by using good scripting about how to use the card and explaining the benefits of the debit card over cash and checks. However, most improvement is achieved by incentivizing usage early on through a new account, bank-driven rewards program.”
Activation also should be driven through proper DDA suite design, which provides account savings triggers when certain card usage is achieved. As penetration increases across the open DDA base, activation should level out to somewhere between 60 to 70 percent, although product types and card types may vary dramatically.
Understanding the FI’s penetration and activation at the product level will further instruct its activation tactics. In general, activation over 65 percent with penetration above 95 percent is a good, achievable goal.
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