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Debit Issuers Respond To Post-Regulation II “New Normal”

Stocks in this article: DFS

Some issuers are positioning GPR cards as supplemental accounts designed for their existing account holders; others are launching GPR prepaid products to serve consumers outside of the banking mainstream. Financial institutions project 55 percent year-over-year growth for their GPR card sales in 2013 (compared to a projected 2 percent decline in prepaid gift card sales).

With respect to EMV, the chip-based payments standard, 95 percent of issuers are aware of networks’ plans to shift the liability for disputed transactions in 2015. In anticipation of the liability shift, 38 percent of financial institutions plan to issue chip-based debit cards in 2014, with another 8 percent planning to issue the cards in 2015. However, many institutions remain unsure of how to support EMV, while also adhering to their merchant routing choice obligations within Reg II. In this environment, more than half of issuers reported that their plan is to wait to see if the industry converges around a common solution.

In the area of mobile payments, issuers are increasingly interested in testing mobile solutions. Thirteen percent of financial institutions are currently participating in a mobile payments pilot, up from 9 percent in 2012. Large banks are the most active pilot participants, with 26 percent testing a solution, an increase from 15 percent last year.

Many issuers view the shift from card to mobile payments as inevitable, with the primary question being when, not if, consumers will adopt mobile payments. Ninety-three percent of issuers expect more than 5 percent of debit transactions to migrate to mobile in the next five years. However, issuers also cite the need for a compelling solution that goes well beyond the novelty factor of paying with a phone to drive meaningful uptake.

About the study

The 2013 Debit Issuer Study, commissioned by PULSE, is the eighth installment in the study series. The study provides an objective fact base on debit card issuer performance and financial institutions’ outlook for the debit card business. Sixty four financial institutions – including large banks, credit unions and community banks – participated in the study, conducted by Oliver Wyman; of these, 26 have at least $10 billion in assets and are therefore subject to Reg II’s interchange cap. Collectively, the participants issue 140 million debit cards and operate 78,000 ATMs; these cards performed 21 billion annual transactions, representing approximately 45 percent of total U.S. debit transactions. The sample is representative of the U.S. debit market in terms of institution type, location and debit network participation.


PULSE, a Discover Financial Services (NYSE: DFS) company, is a leading debit/ATM network, serving approximately 6,100 financial institutions across the United States. This includes 4,100 issuers with which PULSE has direct relationships and 2,000 additional issuers through agreements PULSE has with other debit networks. PULSE links cardholders with ATMs and POS terminals at retail locations nationwide. Through its global ATM network, PULSE provides worldwide cash access for Diners Club and Discover cardholders through more than 1.3 million ATM locations. The company also is a source of electronic payments research and is committed to providing its participants with education on emerging products, services and trends in the payments industry. For more information, visit

Copyright Business Wire 2010
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