Debit Incentive

Friend Bank in Alabama sees debit interchange rise with a bold promotion

By Kelly Pike

These days, it takes an eye-opening gesture just to grab customers’ attention, not to mention getting them to change their behavior.

But that’s just what $130 million-asset Friend Bank in Slocomb, Ala., did with its debit card program. It grew interchange revenue by 244% in net sales value over the past five years.

The secret to the bank’s revenue-boosting success: a free checking account that paid premium interest rate on the first $20,000 deposited—but only if customers used their debit cards at least 15 times a month.

Judson Brooks, chief operating officer at Friend Bank, calls the account “the most significant product introduction we’ve made that has paid dividends over the last few years.”
Friend Bank, located in southeastern Alabama, began the initiative back in 2008. Much of the 100-year-old bank’s market was made up of senior citizens, along with rural citizens and farmers who were hesitant to use debit. The bank believed customers would come to rely on debit’s convenience and safety—but only if they could get customers to start using the product.

Gaining momentum
So the bank went big, creating buzz around the debit card program using a free checking account with an astoundingly high interest rate that piqued customers’ interest. The bank followed through with occasional four-week in-bank promotions, training personal bankers to explain the convenience, value and security of debit cards to open-minded customers.

“We saw that a lot of other banks were doing 10 or 12 transactions, and we decided to go on the high end with that product,” Brooks says of the decision to offer a big rate for a big use commitment. “We wanted to create some energy around that debit card program.” Friend Bank also benefited from an acquisition during the period, significantly boosting the bank’s debit interchange revenue.

Today, the account still offers an above-market rate of 1.5 percent due to the different rate environment, but it’s become less of an incentive as debit card use becomes second nature, Brooks says. “[Customers’] comfort level with that debit card got to the point that it didn’t matter as much what the rate was; it was just easier to use,” he says. “We just had to get over a hump with a customer base that’s not as comfortable with the product.”

“It’s the most significant product introduction we’ve made that has paid dividends over the last few years.”
—Judson Brooks, Friend Bank

Continuing the success
Now that its customers have embraced debit, Friend Bank is taking steps to maintain its base. Part of the challenge is headlines that make customers worry about debit card security. That’s why Friend Bank has invested in some of the latest fraud protection available and made a conscious decision to implement EMV-based chips for its debit cards this year.

The investment has proven worthwhile. Year-to-date, Friend Bank’s monthly fraud loss through the debit card program is 1.44 basis points, compared with an industry average of 8.3 basis points.

“There is a cost associated with our bank providing these services, but we think in the end it’s really paying dividends for us,” says Brooks, who sees interchange revenue continuing to grow. “Our customers have confidence.”

As Friend Bank looks to sustain growth in the future, its biggest challenge will be finding more ways to encourage debit use, Brooks says, since there are few customers left to convert to debit cards. The bank has considered adding a rewards program but has no definite plans.

“We’re going to have to be a little more creative to figure out a way to encourage people to use their cards more next year than this year,” Brooks says. “We need to find ways to reward customers to move that dial.”

Debit cards bring big business for Friend Bank

Growth in net sales value of transactions since 2011
Average debit transaction value
Transactions processed annually
$19 million
The amount of debit sales in 2015

Kelly Pike is a freelance writer in Virginia.