Decoupled Debit Cards

Decoupled debit cards are where one institution issues a debit card that can be linked to any bank account and used for purchases and ATM withdrawals just like debit card consumers get from their bank when they open a checking account. The company pays a fees plus any interchange income.

Pros
1. Can charge rewards to combat the decoupled credit card.

2. Can get features such as free checking, free cards and transaction payout (reward), go online to view cash rewards accruals.

3. Can earn points on debit card purchases for having additional bank products such as money market accounts, CDs, loans, lines of credit, etc.

4. Combines the ACH industry and the payment networks such as Visa, NYCE, etc.

5. The intermediate service provider can capture the interchange income from the card transaction which would previously go to the consumer's financial institution.

6. It helps the consumer because they can use debit cards more frequently, reduce use of credit cards and no longer have to worry about fees associated with using a credit card.

Cons
1. It will hurt the financial institutions by eliminating income from banks that rely heavily on charges such as insufficient funds, etc.

2. Deprives credit unions of transaction fees but who will still have to pay ACH fees.

3. Targeted to 18 to 34 year olds who are generally are more internet savvy and may not be concerned about their relationship with their bank.

4. The transaction is performed and settled online over the branded payment networks between the merchant and the intermediate sevice provider but is settled with the consumer's financial institution using the offline ACH network.

5. Can increase risk to the consumer such as account validation which was not a risk in the previous transaction system.

Be cautious when using decoupled debit cards and be sure to pick the card that is right for you.