A customer walks into a branch, completes an application for a debit card, and is handed one right there and then - with no need to have to wait for it to arrive in the mail a week or so later. This "instant activation" not only pleases customers, who can use the cards the moment they leave the branch, but also benefits the bank financially.

Wichita-based Fidelity Financial Corp., which began instant activation two months ago, estimates the program knocks $2.32 per card off the cost of card issuance, says vice president of strategic planning Cheryl Yavornitzki. The source of the savings: The bank doesn't have to pay a service company to mail the card and the associated personal identification number in two separate envelopes nor does it have to pay another third party to handle the activation calls from bank customers after they receive their cards.

"Instant activation immediately paid for the cost of the equipment we needed to emboss and store the cards in our branches," Yavornitzki says.

Fidelity is one of a growing number of banks that instantly issue cards, according to Noe Rodriguez, chief information officer for Dallas-based Custom Card Systems Inc., which supplied the technology to Fidelity. "A lot of banks are finding that the ability to give customers a debit card instantly gives them an edge over other banks that make them wait," he says.

The technology of instant issuance has been around since the late 1990s, but was mainly used by credit unions, Rodriguez says, adding that Custom Card began seeing more interest from banks about two years ago. He declines to reveal the number of bank clients, but indicates they're still a small minority in the industry.

With instant issuance, branch employees load blank cards into a special machine each morning. When a customer requires a card, the machine is activated. It embosses the customer's name and card number and other necessary information onto the card as well as downloads the required encryption in about 60 seconds. The encryption codes are kept off site as an additional security measure. The necessary equipment and software typically cost between $10,000 and $12,000 per branch, Rodriguez says.

Traditionally, banks have entrusted all the embossing, security and encoding to third parties, which charge for the service and can take more than one week to get the cards into customers' hands.

Fidelity is also looking at new revenue and marketing opportunities that instant activation may present. "We've only been doing this for 60 days so we have not been able to do any trend analysis, but our intuition tells us that we are getting more cards out into the market, increasing our activation rate and getting customers to use them sooner," Yavornitzki says. "Our customers use their signature-based debit cards an average of 12 times a month. We estimate that getting cards into their hands one week earlier alone should amount to about $5 per card in additional revenue."

Banks receive interchange revenue, typically a little more than 1% of the transaction value, every time a customer uses a signature-based debit card at a retail location.

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» SEPTEMBER 28   VOL.1 | NO.2
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