PayTech

Debit Card won’t Solve all Your Problems

RARZACK OLAEGBE

Or maybe your debit would. Let us find out. But before we do kindly note that the world of Fintech is not just hot right now — it is fast becoming a force to be reckoned with. Investment dollars are flowing in at an alarming rate. Several fintech startups are attracting foreign investments like never before. One bank is doling out $40,000 to two Fintech startups. Another is funding some Fintech focusing on artificial intelligence. And the story goes on.

Zach Pettet, the vice president of Fintech strategy at NBKC Bank, a community bank in Kansas City, Missouri, and Managing Director of NBKC’s accelerator, Fountain City Fintech in a report said that Fintech companies are competing to have their debit cards to be consumers’ No. 1 choice, even if it sometimes doesn’t make sense for the company to provide this service.

Some Nigerian banks are engaged in the same act. You would have noticed a few months before your debit card expires, your bank would have sent you a message asking you to opt-in by clicking yes so that a new debit card can be personalised in your name. Also, some of the banks are hell bent on issuing a debit to you even when you do not need one. It is all in the transaction fee, isn’t it? It tallies.

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People are the same everywhere even in America where, according to Pettet, in order to lock-up the interchange rate, the charge that covers the handling and risk of card transactions, Fintechs are targeting younger consumers. 73% of customers 18-34 said they would be willing to try a card from a tech firm they already use.

He said this information from customers fits the business model, and legitimately adds value to the customer. Offering a debit card is a valid strategy. The revenue associated with the interchange (every time a card is swiped, that fintech earns a portion) can be significant for a Fintech startup.

It is the same thing with the bank, since the bank will charge you ATM fee if you use your debit card on another if it is your fourth transaction in a month. The attraction is the transaction fee, not necessarily because the bank likes the photograph that is attached to your KYC form. However, the banks have not yet realised, and maybe the figures have not shown, that transaction has moved to online transfer and USSD code.

Why do you need to join a long queue and waste precious time waiting to use the ATM when you can make a transfer instant through Remita via your smartphone? Why collect another debit card when USSD code does the job instantly?

Acorns, a six-year-old investing and savings

Pettet shared the story of Acorns, a six-year-old investing and savings company that is doing something attractive with a debit card. For every purchase with the Acorns card, the partner retailer will deposit a reward into the consumer’s account. With recent backing from Comcast Ventures, NBCUniversal, and Bain Capital Ventures, Acorns’ valuation skyrocketed to $860 million.

According to Pettet, instead of just chasing the latest fad, companies need to truly create the most value for their customers by doing the following:

Don’t reinvent the wheel

Charge for the product. Digit, the popular money-saving app, took a lot of heat in 2017 when the company announced it would implement a $2.99 monthly fee. Added features did little to salve angry customers, many of whom said they’d pull their funds.

A year later, CEO Ethan Bloch said Digit had helped clients set aside more than $1 billion. Digit made a decision that dramatically shifted the economics and significantly increased sustainability. If a product indeed provides value, consumers will pay for it.

PayDay loan by Access Bank in partnership with Remita, gives you access to instant loan by dialling *901*11#. This is an example of value provision and customers have embraced it.

Provide value through recommendations

If the Fintech startup has built significant trust with its user base, recommendations and third-party offers can be a scalable monetization strategy. Credit Karma is a great example of this. Users trust Credit Karma to provide an up-to-date, accurate credit score. This is similar to what Remita Data Referencing does. Access Bank uses this to simplify its credit applications.

Partner for profit

Pettet said you need to find a partner that adds value to your platform, integrate it, and charge for it. Accounting apps are an excellent example of this. Often dependent on free software to run their books, freelancers and solo-preneurs generally, don’t withhold enough on their taxes. SystemSpecs has partnered FCMB to provide a unique solution for SMEs, which afford the SMEs to seamlessly operate their businesses.

Remember, consumers are fickle and businesses are hard to build for the long term. As such, Fintech startups, banks and other technology companies need to develop business models with diverse revenue streams. Then, maybe your debit would solve all your problems.