The Future of Electronic Payments: Decoupled Cards

Decoupled debit cards, cards that can be linked to an account at any financial institution, are revolutionizing payment systems. HSBC has an added twist to this.


Debit card transactions are growing at a significant rate. According to the 2007 Debit Issuer Survey by Pulse EFT Association, bank and credit union participants expect to grow debit card volume by 17% in 2007. The participants also saw the average transaction volume grow 20.3% for debit signature cards and 15.7% for debit PIN cards over 2006, which leads to greater interchange income for the financial institution.

Credit Unions Among Major Players

The largest banks and credit unions are still issuing a significant number of debit cards each year. Of the top twenty Mastercard issuers and top 18 Visa issuers, only two institutions has less debit cards outstanding in 2006 when compared to 2005. Credit unions are playing significant roles within this market. Within the top twenty Mastercard issuers, five are credit unions with large debit card programs. When looking at the top Visa debit issuers, Navy ($30.0 billion, Merrifield , VA ) stands as the twelfth largest.

A New Type of Decoupled Card

This market became even more competitive with the introduction of a new type of debit card that can be linked to an account at any financial institution through Capital One. HSBC has taken this idea a step further. Along with the decoupled debit card, they are adding a credit component. As of now, the credit line will be done through HSBC and not able to be linked to other financial institutions. Daniel J. Eckert of HSBC states that the typical consumer carries 12 plastic cards, 9 of which are credit cards (American Banker – Nov. 15, 2007). Called the OptiPay card, it will act as a consumers debit and credit card, cutting down on the number of cards in a consumer's wallet.

Logistically, the card can be used with any current merchant card reader. Transactions will go through the Tempo Payments Network, which is currently accepted at over 300,000 locations, including Wal-Mart, Best Buy, and Home Depot.

The Credit Union Impact

These products could be damaging to credit unions since owning a decoupled debit card could be very attractive for the every day consumer. According to Callahan's 2007 Non-Interest Income Survey, credit unions reported 18.8% of non-interest income from debit card interchange income and 12.4% came from credit card interchange income. As of the second quarter of 2007, non-interest income totaled $4.8 billion for the credit union industry. Any competition that may take members away from using their credit union cards, while having their credit union account linked to another institution's product would take away key interchange income from credit unions.

The key for credit unions is to be sure their value is apparent to members.




Nov. 19, 2007


  • Decoupled is the hot button right now - however these programs are so stripped down as far as ATM payment options, daily limits, and rewards caps, that once consumers are educated......these "HUGO''s" of the payment industry will soon be forgotten. You can quote me! What I would like to see researched further are the new ecommerce payments RevolutionCard, PayPals Virtual Debit card, Bill Me Later - In my humble opinion these new payment channels pose more of a threat to credit union credit and debit transaction volumes and thus interchange...............
    Payment Analyst