By Laura Alix
With banks still on the hook for the bulk of the mess caused by data breaches that have hit the likes of Target and Home Depot, bankers are increasingly turning to technologies that may help them better mitigate the effects of cyber attacks. Enter instant issuance of debit and credit cards.
Instant issuance, for the uninitiated, is in-branch issuance of credit and debit cards. Instant issuance solutions vary, depending on just how much a bank wants to offer. Banks can opt for temporary instant debit cards or offer a more permanent card, embossed with the customer’s name. With the former solution, branch personnel activate a non-personalized, encoded card using special processing software and hand it to the customer to use until a personalized, permanent card arrives in the mail.
While the capability to instantly issue has been around for over a decade (and a more primitive version of instant issue has existed even longer for ATM cards), Sharon Pazlar, Fiserv’s director of output solutions, said the company has seen a “dramatic” increase in interest over the past few years, possibly owing to high-profile data breaches at big-box retailers and small businesses alike.
And though cyber attacks are unlikely to abate any time soon, Pazlar said many banks are also looking at instant issuance as a competitive differentiator.
Indeed, Doug Johnson, senior vice president of risk management at the American Bankers Association, theorized that instant issuance may make more sense as a competitive differentiator than as a stopgap measure to be used in the event of a massive data breach involving millions of cards.
Costs vs. Benefits
Of course, offering instant issuance requires an investment of both time and money, and that’s no small concern for community banks operating on razor-thin margins these days. Hardware and software must be purchased, staff must be trained, and blank cards must be stored securely.
But the cost more than makes up for itself in reduced postage and customer retention, said Jim Ellis, senior vice president at Custom Card Systems – An ABnote Co.
“The cost of putting a card through instant issuance can actually be more cost effective than having the card mailed,” he said. “You have a time delay, which has value. You also have the card that has to be mailed and the PIN that has to be mailed separately. When they come into a bank, not only do they have the satisfaction and customer retention, there’s no mailing.”
Ellis said instant issuance of debit and credit cards also appeals to younger Gen Y customers, and he said that customers increasingly expect instant issuance.
“If someone’s going to open an account for the first time, and your bank can offer them an instant credit card, they’re more likely to deposit their check right then,” he said.
Larger financial institutions are often the early adopters of new technologies or services, but Johnson said that hasn’t necessarily been the case with instant issuance.
“I know that the core processors – FIS and Fiserv, for example – do have a product offering that makes it a little more attractive to the community bank market. One of the other things that could become a differentiator is for large financial institutions to do what the small ones cannot … I don’t see that as the case. I think the core processors are providing that solution for the community banks as well,” he said.
Pazlar cited a 2006 study undertaken by Visa, which estimated that approximately 200 issuers with 1,500 branches were offering in-branch issuance of Visa cards at that time, and other, more recent industry research that suggested as many as half of financial institutions in America are participating in some form of instant issuance.
Instant Issue, Meet EMV
The increased interest in instant issuance also coincides with increased interest in another card technology: EMV, or the chip and PIN cards popular overseas.
“As we migrate toward customers having breaches and becoming more interested in having instant access to a replacement, [instant issuance is] becoming more prevalent at the same time that banks are taking a serious look at EMV,” Ellis said.
He said that EMV isn’t necessarily a game-changer, but it does widen the menu of options available to banks considering instant issue.
“It’s easily accessible. It is very low-cost, relatively speaking, to install an instant issue solution. If you pick a partner that’s already integrated with your processor, there are very few IT requirements involved,” Ellis said.
And finally, he added, “customers are just expecting that this is one of the services their bank should offer.”
Laura Alix is a staff writer for The Warren Group.