The Next Big Thing in Cards: Co-Branded Decoupled Debit Cards

Report Summary

The Next Big Thing in Cards: Co-Branded Decoupled Debit Cards

Capital One's launch of a MasterCard decoupled debit card is a major breakthrough in card issuing. Aite Group views the product as squarely taking on deposit institutions, and predicts it will have a long-lasting impact on both the card and banking indust

Gwenn Bézard
Research Officer/Chief Information Officer

Boston, MA, June 4, 2007 – A new report from Aite Group, LLC, examines the introduction of an innovative 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 Bézard, 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," predicts Bézard. Aite Group anticipates that 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.

This 13-page Impact Note contains 7 figures. Clients of Aite Group's Retail Banking services can download the report.

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