Mobile provides banks with opportunities to improve the profitability of debit programs, yet many are missing out.

According to a multinational study conducted by First Data Corp., banks should incorporate mobile and contactless payments in their initiatives. Mobile is particularly relevant to the youth market.

“There is a huge potential for banks to grow their debit businesses as debit continues to benefit from the substitution of cash and checks around the world,” said Paul Stanley, senior vice president of financial institutions at First Data, Bradford, Britain.

“Mobile banking will become increasingly important for banks around the world, but for different reasons,” he said. “In mature payments markets, mobile has a big role to play in giving people – especially the younger population – the option of more convenient and flexible payment methods.

First Data powers the global economy by letting consumers and businesses buy goods and services using virtually any form of electronic payment.

Mobile money
The study highlighted a high level of untapped opportunity for banks to improve the success and profitability of their debit program, such as driving more debit revenue through improving activation and usage, increasing the POS footprint  to drive significant increases in transaction volumes and card usage and understanding the true costs of the debit channel.

In addition, banks should use segmentation techniques for their debit customer base and share best practice and experience from the credit business into the debit business.

According to First Data, mobile and prepaid services will be central to bringing electronic payments to the unbanked and underserved populations in developing markets – and are already introduced for this purpose by banks in Brazil, Mexico and Turkey.

“The findings of the report mirror many of the issues raised with us by banks around the world,” Mr. Stanley said. “These include the need to increase debit card usage at the point of sale, concerns about the level of fraud on debit cards, and the pressing need to increase the level of innovation in debit programs.

“It was interesting to note the significant concern in most markets about the potential impact of regulation and legislation undermining growth, development and innovation in the debit market,” he said.

Mobile banking
Mobile banking saw an increase in usage and in institutions offering the service in the last year, according to IDC Financial Insights’ recent survey.

The company reported that mobile banking usage almost doubled since last year’s survey (see story).

“Both mobile and prepaid will be crucial in enabling people in emerging markets to make payments as the physical card acceptance network grows,” Mr. Stanley said.

Final Take