Tech Talk


Quick Cards

Instant-issue card programs provide a rapid-response to meet today’s market demand

By Karen Epper Hoffman

In this Internet-everywhere world, consumers are becoming accustomed to a greater immediacy in getting what they want as soon as they want it—and that’s true even when getting a new payments card from their community bank.
Enter instant-issue programs that issue activated credit or debit cards to customers on the spot at the branch, avoiding the delay in mailing cards for new accounts or replacing existing lost or compromised cards.

“Customers expect to have their account open and access to their account immediately,” says Greg Houlette, senior vice president for Happy State Bank in Happy, Texas.

Houlette adds that the $2.4 billion-asset community bank’s customers receive activated debit cards without having to wait to receive them by mail. “Instant-issue in our branches allows the customer to have their debit card in their hand before they leave the bank,” he says. “We instant-issue our debit cards to improve our customer service experience.”

Indeed a number of vendor processors, including FIS in Jacksonville, Fla., and Fiserv Inc. in Brookfield, Wis., have begun offering instant-issue card capability at the point of sale to their community bank clients. Such programs can also avoid delivery issues that plague mailing cards, which can often take 10 days or more to reach customers, according to Bob Roth, managing director for vendor management and payments for Cornerstone Advisors in Scottsdale, Ariz.

Roth estimates that three-quarters of the consulting firm’s community bank clients either have an instant-issue card program or are considering one.

Ron Mazursky, director of debit advisory services at Mercator Advisory Group and author of a Mercator report, “Instant Issuance of Debit Cards: The Newest Best Practice,” says that after seeing “ups and downs” in instant-issue card programs, the recent card data breaches by Target Corp. and other large retailers has increased the demand and popularity for the service. Megabanks like JPMorgan Chase & Co. and TD Bank are advertising that they issue cards quickly, but Mazursky says community banks also have been the most aggressive in recently adopting these programs.

“Customers went into a panic over their cards being potentially used fraudulently and requests started coming in to banks to replace cards,” he says.

How instant-issue works

Operating from desktop machines tied to centralized core systems, instant-issue card programs allow banks to generate new cards—with a customer’s embossed name and a working magstripe—as quickly as printing a piece of paper on a laser printer. The machines generating the cards operate on Web-based software and generally cost about $5,000 to $8,000.

Roth says two generations of instant-issue systems are in the marketplace. An earlier generation, comprising about 75 percent of the existing programs, involves stand-alone systems that allow banks to imprint cards that customers pocket and carry home immediately. But those customers still must activate those cards later at home with a follow-up confirmation telephone call.

Second-generation systems on the market today—where the process is integrated directly into the bank’s core processing system—allow banks to provide customers with cards that can be immediately used for transactions without a follow-up activation call.

“Smaller banks are able to get into this faster than the big banks with hundreds of branches,” Roth says.

Instant-issue vendors are also in the process of allowing their systems to issue EMV security chip cards. EFT Source Inc. in Nashville, Tenn., launched its Card@Once instant-issue card system four years ago as a software-as-a-service model. The company has its machines installed in 1,500 branches at 500 banks across the country. EFT Source President Bill Dinker says the company has installed systems that have been EMV-capable since the fourth quarter of 2013 and that pilots for EMV instant-issue programs are underway.

Card and Carry

Does your community bank offer an instant-issue credit or debit card program for its customers?
76% – No
21% – Yes
4% – Not sure
Source: ICBA NewsWatch Today poll, June 2014

The potential benefits

The payback on instant-issuance programs derives from a host of measurable and soft savings and returns, including decreased expense for postage in not having to mail either cards or separate PIN numbers, and reduced fraud risk in handing cards directly to customer. In addition to delivering better customer service, other potential benefits touted include the opportunity to capture incremental interchange fees from earlier use of cards, and better chance of their card becoming top-of-wallet.

“The Holy Grail is to hand [a customer] that card as soon as they open an account and have it ready to be used,” Roth says. “Banks aspire to higher activation levels.”

Roth estimates that card activation improves by 10 percent with instant issuance.

Among the potential benefits of instant issuance, vendor EFT Source cites that its customers have experienced increased card transactions and interchange revenue after adopting such programs, as well as savings in total card production.

Houlette says Happy State Bank, which instantly issues permanent payments cards to customers, does not measure the profitability for this service. Rather, he says, “For us, it is a no-brainer to offer our customers instant-issue. Pretty simple, it works for the bank because we can provide great customer service by giving customers an activated card as soon as the account is opened.”

Further, he is confident that instant issuance programs reduce fraud by eliminating the chance risk a card could be stolen from the customer’s mailbox.

While some banks use their instant-issuance programs to offer customers temporary cards, Mazursky says more are deciding to issue permanent cards to reduce costs.

For its part, Happy State Bank will begin “instantly issuing EMV chip-based cards in the future, but at this time we do not know the associated cost,” Houlette says.

“We will be able to change our card stock to EMV-chip cards in the next year and help our customers with an extra layer of security. Traditional card issuance will not be utilized as much once you implement an instant-issue program.”

Karen Epper Hoffman is a financial writer working in Europe.