Spending on debit cards in the United States exceeded credit card spending for the first time in Q1 2009 as financially weakened, less confident consumers reduced their overall spending and chose to pay now, not later.
Unlike the ubiquitous credit card reward programs, debit card reward programs are only beginning to gain scale, but TowerGroup expects them to reach 70% of card issuers by 2010.
Card issuers intending to use loyalty programs to capture increased debit transaction volume face the challenge of adapting reward programs to debit cards' slimmer margins.
Although no single card issuer has the perfect solution for rewards, outstanding programs exist in each of the four reward categories: points for purchases, cash back, savings incentive, and merchant coalitions.
TowerGroup recommends that debit issuers protect and expand their market share by means of multipronged loyalty design that balances point programs with merchant relationships, enterprise rewards, and customer savings options.
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