As economic conditions remain unsteady, MasterCard Worldwide has launched a debit card with an enhanced rewards system designed to benefit affluent consumers who choose debit instead of credit cards as their preferred card-payment method.
KeyBank, a wholly owned subsidiary of Cleveland-based KeyCorp, last week announced it is the first financial institution to offer the World Debit PayPass contactless card. The card features MasterCard's Savings Plus rewards and is designed for consumers who spend $7,500 or more annually with their debit cards, according to Carl Stauffeneger, KeyBank senior consumer product manager.
KeyBank wants to give affluent customers who are heavy debit card users more "opportunities to let them get a little bit of that money back [in tough economic conditions] but still make that purchase that they need to make or want to make," Stauffeneger says.
The bank expects to issue 25,000 World Debit cards by end of March and 60,000 during the next 12 months.
MasterCard first introduced MasterCard Savings Plus in October. The merchant-funded program is available to all MasterCard debit cardholders and complements an issuer's existing rewards offerings.
World Debit cardholders receive premium-level access to MasterCard Savings at no charge; participation usually costs cardholders $29.95 per year. Program discounts range from 20% to 50% on selected products sold by participating merchants. Among the thousands of participating merchants are Best Buy Co. Inc., Home Depot Inc. and Office Depot Inc., a MasterCard spokesperson says. Discounts also include free shipping on Web site orders.
"One of the things we realized is that in extraordinary times, we think that extraordinary offers of value are required," Stauffeneger says.
Consumers value savings, and that was the primary driver to release the card, says Patricia Preston, MasterCard senior vice president of U.S. debit product management and development. The question became, "what can we really add to the debit card that can really help our consumers feel like they are getting value across rewards," she says.
Other card companies and issuers likely will follow MasterCard's approach, contends Lee Manfred, partner with First Annapolis Consulting Inc. of Linthicum, Md. "It's a logical product extension for the industry," he says.
Enhanced debit card rewards become more valuable now that some credit card issuers are reducing the value of rewards, says Adil Moussa, an analyst with Boston-based Aite Group LLC. "It's even more important to have some kind of rewards to entice cardholders to use the card more and to gain some market share," he says.
Debit card rewards in general are becoming more popular with consumers as financial institutions increase their availability. Forty of the top 50 banks in 2008 had at least one debit card rewards program compared with 32 institutions in 2007, according to a report by Maynard, Mass.-based Mercator Advisory Group Inc.
Preston says adding contactless functionality was "not the primary driver" for the card, but Stauffeneger and Manfred believe it will add to the card's appeal.
"From the affluent-customer perspective, you want all the bells and whistles," Manfred says.
KeyBank views contactless cards as a way to entice its customers to use a debit card for purchases between $1 and $25, Stauffeneger says. "[Before contactless], people were trying to decide what to use to pay for that micropayment. Do I use cash or a check?" he says.
KeyBank is hoping World Debit customers choose debit. ATM