Payment Industry Insider

Guest post from Morriss Partee, CEO of EverythingCU.com

When I saw an email from CapitalOne in my inbox on the morning of June 20, I thought it was just like any other of the junk emails that they are constantly sending me. But this one was different and caught my eye as it was hitting the virtual trash can.

I was first alerted to CapitalOne’s foray into what is now called a ‘decoupled’ debit card on June 3, 2007, by Henrico FCU’s VP of Marketing, Susan Epperson, who spotted it at her local grocery store, Ukrops, in Richmond, Virginia. Susan posted the story on our CU professionals-only web site, EverythingCU.com. A day later, Colin Henderson of BankWatch wrote an excellent piece about it.

On May 8, 2008, the Digital Transactions blog informed us that this foray was a one-year trial that had reached its conclusion. In June, right here on TMG’s Payment Industry Insider blog, Brian Scott also reported the Digital Transactions story and recommended that credit unions evaluate their own reward offerings. For those thinking that the end of CapOne’s “experiment” would be the end of the decoupled debit card, well, that would be incorrect.

This email that I received (click the image above to see it full size) reveals a new and revised Decoupled Debit Card strategy by CapitalOne. No longer a regional effort tied to rewards at a supermarket chain, they now (presumably) have gone national, and have tied it to their own reward program. On top of that, they are charging the consumer $19.95 per year for the service. My guess is that they have emailed this offer to all of their credit card consumers who meet their target criteria.

Clicking on “Learn More” in the email leads to this CapitalOne page.

Implications: As Brian Scott reported earlier, credit unions did not see any attrition from CapOne’s initial decoupled debit experiment. But, that was a regional experiment tied to one supermarket’s reward program. NOW, all bets are off since CapOne has gone national and has tied it to their own reward program.

Potentially millions of consumers who are dissatisfied with their current bank or credit union, for whatever reason, may start using this debit card as their primary financial institution (PFI), since checks are virtually a thing of the past for a vast number of consumers already.

If their current institution charges overdraft fees, having a credit card tied to their debit card may make far more sense (i.e. less costly in fees), for everyday purchases. Such a setup from CapitalOne may prove more convenient than traditional financial institutions, especially those still handcuffed with cumbersome, paper-based credit application processes.

Morriss Partee is the Chief Experience Officer of EverythingCU.com, the online community exclusively for credit union professionals, with 6,191 members who share news, ideas and best practices with each other. Morriss also speaks on how credit unions can thrive in World 2.0 and conducts hands-on World 2.0 workshops for credit unions, leagues and organizations. His blog is titled World 2.0 Adventure.