“Credit unions will admit to us that they’ve never had to market debit before,” says Ron Silvia, director of debit services for PCSU Financial Services, a St. Petersburg, Fla.-based cooperative owned by more than 500 member credit unions. “Now they’re starting to realize that it’s a big money maker, they’re asking, ‘What if I get one or two extra transactions per month per cardholder?’”

Consulting firm McKinsey & Co. has estimated that debit cards will account for almost 30% of banks’ demand deposit fee income by 2009, about double today’s percentage.

PSCU introduced its debit card reward program, called CURewards, three years ago. So far, only 15 of the cooperative’s members are offering it. But lured by the promise of improved customer loyalty and higher card activation and usage rates, six more are preparing to roll it out, Silvia says. 

Since introducing the program in May 2005, PSCU member Novartis Federal Credit Union in East Hanover, N.J. has seen usage of signature-based transactions rising from 1,869 to 9,300 a month, says Charles Setteducato, vice president of finance for the $84 million-asset institution.

Average monthly amounts in those transactions have risen from $94,000 to $450,000, Setteducato added. And interchange income is on the rise: Novartis does not break out income earned from signature-based transactions versus PIN-based ones, but the total through last September was $75,000, up from $65,000 for the same period a year ago, he said.

Setteducato says Novartis embraced the rewards program, which it calls DebitAdvantage, mainly for customer retention purposes. “People love it, and it’s not costing them a penny,” he said.

The credit union’s 2,554 debit cardholders earn 1 point for every $5 in signature transactions. The accumulated points can earn them everything from a calculator to vacations, which Setteducato says helps deepen customer relationships.

As evidence, he points to Novartis’ activation rate: 63% of its signature debit customers, compared with the credit union industry average of 54%, according to PSCU. Also, Novartis’ average transaction size is $63, 50% higher than the industry average. “The more cards we have out there, the more income we make,” Setteducato says.

Because of its diverse membership, PSCU made its debit rewards program highly flexible, Silvia says. For example, members can link their credit card rewards program to their debit program, as Novartis does. Or they can start granting rewards points once monthly transactions pass a certain number. Or they can credit the reward points toward a lower rate on a car loan.   

PSCU offers card processing through Greenwood Village, Co.-based First Data Corp. and manages the rewards programs, including marketing, card management, and Web site management, for its credit union members. Prizes are handled through third parties, and customers can shop for them via a Web link, Silvia says.

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