Runge & Company
Instant Issuance of Visa Check Cards
Untitled White Paper
&
Pilot Study Analysis
2nd Working Draft
Visa Internal Review
January 108, 2007
This document contains the confidential and proprietary information of Visa USA. It may not be
duplicated, published, transmitted, or disclosed without Visa’s prior written permission.
Contents
Untitled White Paper
Introduction
BackgroundIntroduction
• What is Instant Card Issuance?
• Landscape of ICI: current situation, trends, etc.
• # of Visa issuers/branches instantly issuing embossed cards
• Branches v. campus programs
• Barriers/challenges for larger issuers
• Issuers looking to Visa for info on business case
Pilot Overview
• Methodology
• Objectives: Quantitative and qualitative. What, if any, effects does instant card issuance have on performance metrics? On cardholder perceptions about security and convenience?
• Tactics:
o Performance tracking for ICI v. control
o Customer survey
• Description of Pilot, e.g., card instantly issued for 6 months; activity tracked during those that time; tracking for ICI v. Control; Total for test branches v. Control; lifecycle approach for measurement
What is Instant Card Issuance?
Pilot Results
• Range of metric changes
• Survey results
• Factors that may affect metrics/customer service, e.g., instant activation, consistent cardholder education at acct opening, etc.
Key Considerations, i.e., “Roadmap” for issuers considering ICI
• Visa Operating Regs (embossing requirements, etc.)
• Visa Security Standards
• Business case drivers
• Equipment specs and suppliers– should we mention VARs by name?
• Branch operations, e.g., Processor/DDA systems integration
• Branch education on use of equipment AND key messages during acct opening process
• Cardholder education at acct opening—“activation,” how to use card, etc.
• Customer experience
• New DDAs v. replacement cards
• All or some branches?
• Issuance of multiple plastics
• Etc.
Latest developments, e.g., new equipment, anything appropriate to share about ICI of unembossed cards, etc. flat graphics (digital photo and customized card graphics), and contactless chip cards (RFID).
Visa’s Instant Card Issuance (ICI) Pilot Study
What the ICI Pilot Demonstrated
How Does ICI Affect Card Activation Rates?
Can ICI Increase Card Usage and Sales?
Evaluating the Business Case
Technology Requirements
Branch Operations and Risk Management
The Future of Instant Issuance
Instant Card Issuance (ICI) Pilot Study Review
History and Background of Instant Card Issuance
Examples of Successful ICI Programs
Why Visa Launched the ICI Pilot
Key Issues Addressed in the ICI Pilot
Issuer Interest in ICI
How the ICI Pilot was Done
Formal Research Design
Branch Procedures
New Account Survey
ICI Pilot Sampling Procedures
How the Data was Analyzed
Special Notes for Interpreting Results
Results
Initial Card Activation
Activation by Transaction Type
Longer Term Cardholder Behavior
Cumulative Analysis
Transaction Profiles
Power Scores
Other Potential Interactions
New Account Survey Results
What the ICI Pilot Study Says About Instant Issuance
Limitations of the ICI Pilot
Suggestions for Further Research
Appendix
Untitled White Paper
Background
• The Instant Card Issuance Landscape
• Branches Versus Campus Programs
• Challenges for Larger Issuers
• About this Study
The Instant Card Issuance Landscape
An increasing number of mid-size-to-large banks are evaluating and implementing “instant” card issuance technology as a tool to put debit cards in customers’ hands more quickly. With instant issuance, a Visa Check Card (VCC) is personalized, embossed, encoded and foil tipped, on-the-spot, in the branch during account opening. Card security codes (CVV and CVV2) and customer selected PINs are also incorporated on the card during the card issuance process.
Instantly issuing a VCC when a new DDA account is opened is generally thought to offer many benefits and opportunities to the issuer, although very little quantitative or qualitative research has been published to date. Banks who utilize instant issuance generally feel that it offers a process improvement to mailing cards, thereby enabling the bank to serve customers better, providing employees with a faster, more customer-focused way of delivering financial cards, either during account opening or to replace lost or stolen cards. Furthermore, instant issuance technology gives an issuer the flexibility to issue many different permanent card products in the branch, and/or in a back office environment including ATM and debit cards, gift cards or other prepaid debit products, credit cards, campus cards (with digital photo) and payroll cards.
Some of the key benefits of instant issuance include:
|Cardholders are able to use their VCCs immediately without having to wait for the cards to arrive in the |
|mail, increasing customer satisfaction and accelerating card activation rates. |
| |
|Issuers gain competitive advantages in the form of increased interchange income and brand differentiation.|
| |
| |
|Instant issuance can be combined with incentive programs and emerging technologies that are driven by |
|increased consumer expectations. |
The technology to personalize embossed cards in a branch setting has been available for several years and hundreds of credit unions and smaller banks have successfully implemented programs. More than 2,000 branches in the U.S. are instantly issuing embossed Visa or MasterCard products, and the number is increasing every month.
Branches versus Campus Programs
-Example-
Instantly Issuing a Visa Check Card at a Branch in Wal-Mart
Desert Schools Credit Union in Phoenix instantly issues more than 9000 Visa Check cards each month at 54 branches including retail locations such as Wal-Mart.
• CSR’s are trained to issue personalized and embossed VCCs at the time an account is opened and to replace lost cards.
• New cards are “instantly activated” for offline debit transactions through Visa DPS.
• Visa security guidelines minimize fraud loss. A dual control system requires more than one person’s password to handle card stock.
• Off-the-shelf instant issuance software is supplied by Dynamic Card Solutions.
Wachovia’s campus card program
Commerce Bank (NJ)
Challenges for Larger Issuers
Instant issuance presents some challenges to issuers:
1. Risk of employee fraud or theft- The bank should carry adequate liability insurance in case of fraud, or theft of embossers or card stock.
2. Training and increased audit requirements- Significant audit and security controls are embedded in the embossing machine and in third party instant issuance software. The bank can mitigate operational risk by controlling employee access and maintaining an audit trail for all cards produced. Each branch should be regularly audited to ensure compliance with the bank’s instant card issuance guidelines.
3. EMPHASIZE Some internal systems development will be necessary- To fully automate the card ordering and card activation processes and eliminate manual data entry by a CSR and/or back office staff, some degree of systems development will be necessary.
4. A bank evaluating the business case for instant issuance should identify opportunities with its debit processor to systematically support “instant card activation”, thereby completing the streamlining of the card issuance process. With instant card activation, the debit card is automatically activated after the customer’s DDA account is opened and funded, and a Visa check card has been issued. Combined with instant card issuance, instant card activation removes all barriers to immediate card usage, increasing the likelihood that the customer will become an active cardholder. Visa DPS currently supports instant card activation of VCCs [insert hyperlink to DPS info or reference to appendix].
About this Study
By mid-2005, an increasing number of national and regional debit card issuers were approaching Visa looking for assistance in evaluating the business case for instant issuance, specifically:
|Does instant issuance improve activation and usage metrics? |
|Do the benefits outweigh the investment in hardware/software? |
|How does instant issuance affect the customer experience and branch operations? |
|What are the security implications? |
Visa conducted the Instant Card Issuance (ICI) Pilot Study in 2006 to provide issuers with the quantitative and qualitative data to answer these questions.
MAY NOT NEED THIS NOW - KEEP IT FOR NOW
|Instant issuance is a method for issuing personalized financial cards in a bank | |-Example- |
|branch or at another secure “remote” location. | | |
| | |Instantly Issuing a Visa Check Card at a Branch in |
|A small, desktop system is used to emboss and encode customer information on | |Wal-Mart |
|CR-80 card stock, including: | | |
| | |Desert Schools Credit Union in Phoenix instantly issues |
|Cardholder name | |more than 9000 Visa Check cards each month at 54 branches |
|Expiration date | |including retail locations such as Wal-Mart. |
|Digital photos. | | |
|Customized graphics. | |CSR’s are trained to issue personalized and embossed VCCs |
|Rear indent printing of CVV2 security data. | |at the time an account is opened and to replace lost |
| | |cards. |
|Card issuance typically takes about 60 seconds. | |New cards are “instantly activated” for offline debit |
| | |transactions through Visa DPS. |
|The card issuance process is synchronized with DDA account opening through | |Visa security guidelines minimize fraud loss. A dual |
|software integration or via an alternative procedure for updating card record | |control system requires more than one person’s password to|
|data on the issuer’s host database. | |handle card stock. |
| | |Off-the-shelf instant issuance software is supplied by |
| | |Dynamic Card Solutions. |
| | | |
Introduction
Instantly issuing a Visa Check card (VCC) when a new DDA account is opened can increase customer satisfaction and card activation rates. Instant issuance offers many important benefits and opportunities.
• Cardholders are able to use a VCC immediately without having to wait for the card to arrive in the mail.
• Issuers gain competitive advantages in the form of increased interchange income and brand differentiation.
• Instant issuance can be combined with incentive programs and emerging technologies that are driven by increased consumer expectations.
What is Instant Card Issuance?
- Example -
|Instant issuance is a method for issuing financial cards in a bank branch or| | |
|at another secure “remote” location. | |Instantly Issuing a Visa Check Card at a Branch in |
| | |Wal-Mart |
|A small, desktop system is used to emboss and encode cardholder information on | | |
|CR-80 card stock, including: | |Desert Schools Credit Union in Phoenix instantly issues |
| | |more than 9000 Visa Check cards each month at 54 branches |
|Digital ID photos. | |including retail locations such as Wal-Mart. |
| | | |
|Customized graphics. | |CSR’s are trained to issue personalized and embossed VCC’s|
| | |at the time an account is opened and to replace lost |
|Rear indent printing of CVV2 security data. | |cards. |
| | |New cards are “instantly activated” for offline debit |
|Card issuance typically takes about 60 seconds. | |transactions through Visa DPS. |
| | |Visa security guidelines minimize fraud loss. A dual |
|The process is synchronized with DDA account opening through software integration| |control system requires more than one person’s password to|
|or other procedure for updating card record data on a host database. | |handle card stock. |
| | |Off-the-shelf instant issuance software is supplied by |
| | |Dynamic Card Solutions. |
| | | |
Pilot Study Overview
• Pilot Description
• Objectives
• Methodology
• Tactics
Pilot Description
Objectives
The Pilot Study had three broad objectives:
1. Quantify the basic effects of ICI on cardholder behavior from the time a new DDA account is opened using standard Visa performance metrics.
2. Identify the key operational and technical requirements for implementing ICI.
3. Evaluate the business case for ICI based upon the results of the pilot study and other qualitative considerations, including customer perceptions about security and convenience.
Methodology
The project involved deploying ICI systems at multiple issuer locations and collecting data from new cardholders who were instantly issued VCCs at the time their DDAs were opened.
• Runge & Company () provided consulting services for research design, project implementation, and analysis.
• Three vendors, Dynamic Card Solutions, DemoTeller Systems Inc., and Magtek offered to provide discounted hardware and software for the project.
• The opportunity to participate in the study was formally presented to numerous issuers.
The results of the ICI Pilot Study are based on the analysis of 4764 new checking accounts opened between May and October of 2006.
Tactics
Formal Research Design
The study and subsequent analyses reflected a 2 (banks) x 2 (control vs. test) X 6 (months) repeated measures design in which data was collected for multiple dependent variables including:
• Penetration Rate
• Days to First Offline Purchase Transaction
• Days to First Online Purchase Transaction
• Online and Offline Activation Rates
• Online and Offline Transactions per Issued and per Active VCC
• Online and Offline Sales Dollars (including Average Ticket) per Issued and per Active VCC
• Offline / Online POS Transaction Mix
Branch Procedures
• Managers at the test branches were given instructions to train Customer Service Representatives (CSRs) on how to instantly issue VCCs, and to proactively offer instantly issued VCCs to all new customers at the time of DDA opening.
▪ The CSRs were also instructed to educate new cardholders on the features and benefits of the VCC, in order to encourage signature-based debit behavior.
▪ After the DDA was opened and the VCC card issued, each customer received a new account kit that included disclosure statements and marketing collateral.
New Account Survey
New customers were asked to complete a brief New Account Survey, a sample of which is shown in Error! Reference source not found.
Pilot Study Results
• Performance Metrics (Decide on how to compare bank data- Michele likes the idea of a “range” of results
• Survey Results
• Influencing Factors
Performance Metrics
➢ Instant issuance of Visa Check Cards (VCCs) has emerged as an alternative to mailing a card to a customer after a new account is opened.
The technology to print and emboss cards in a branch setting has been available for several years and numerous credit unions and smaller banks have successfully implemented programs. Many tier-one banks and regional issuers are considering launching instant issuance on a large scale.
Visa’s Instant Card Issuance Pilot Study
Visa conducted the Instant Card Issuance (ICI) Pilot Study in 2006. The project involved deploying ICI systems at multiple issuer locations and collecting data from new cardholders who were instantly issued VCCs at the time a DDA account was opened. Runge & Company provided consulting services for research design, project implementation, and analysis. The goals of the program included three broad objectives:
Measure the basic effects of ICI on cardholder behavior from the time a new DDA account is opened using standard performance metrics.
Identify the key operational and technical requirements for implementing ICI.
Evaluate the business case for ICI based upon the results of the pilot study and other relevant considerations.
The results of the ICI Pilot are based on the analysis of 4764 new DDA accounts opened between May and October of 2006.
What the ICI Pilot Demonstrated
Instant issuance had positive effects on measures of customer satisfaction and on key cardholder performance metrics, particularly in the first few months of the new banking relationship:.
• 70% of new cardholders surveyed felt that getting a VCC instantly issued at the branch was a safer and more convenient alternative than getting the card in the mail.
• ICI cardholders were more likely to use their cards.
• ICI produced higher card activation rates for up to 180 days after a DDA account was opened.
• The impact of ICI on early cardholder behavior was substantial. Results pertaining to first transaction date, activation rates, usage, and sales suggest that ICI that may create significant opportunities for an issuer in terms of developing a business case for instant issuance.
• The greatest challenges to implementing ICI are related to technical integration of ICI functionality with account opening processes and with training branch employees to produce cards and handle Visa-branded card stock under dual controlof customer service representatives.
• A survey of sixteen major Visa issuers indicated substantial interest in launching ICI programs in the near future.
How Does ICI Affect Card Activation Rates?
|The ICI Pilot demonstrated that Instant issuance accelerates and increases |[pic] |
|card activation:. | |
| | |
|On average, cardholders receiving a VCC in the branch at the time of account| |
|opening used their cards eleven days faster than those who got cards in the | |
|mail. | |
| | |
|Many new cardholders began using their instantly issued check cards within | |
|twenty-four hours. | |
➢ More than a third of new cardholders began using their instantly issued VCCs before any any mailed cards were used for the first time.
➢ At the end of thirty days, 75% of the instantly issued cards had been activated while only 56% of mailed cards had been used for any offline transactions.
➢ Instantly issued VCCs met or exceeded peer group norms and showed higher activation rates for offline and online transactions for the entire 180 days of the ICI Pilot in comparison to cards that were mailed.
Can ICI Increase Card Usage and Sales?
Yes. Instant issuance offers clear advantages over mailed cards in the first thirty days following account opening. The ICI Pilot indicates that instant issuance can significantly reduce the number of days needed to reach or exceed an issuer’s baseline debit portfolio performance for key VCC score card metrics.
• ICI penetration rates approach 100%, while peer group averages for mailed cards typically range from 65-80%.
• All measures of VCC usage were substantially higher for ICI cards in the first month after account opening. The number of offline transactions for instantly issued cards was equivalent to a peer group norm of approximately twelve transactions per month.
• Total purchases were greater for ICI in the first 30 days by a wide margin for both online and offline transactions.
• While ICI did not appear to have a direct affect on the average offline sales ticket in the Pilot, the combined effects of increased penetration, activation, and transaction volume produced Power Scores well above both peer group averages and mailed cards in the first three months after a DDA account was opened.
• Three months after account opening, ICI and mailed card metrics tended to converge with peer averages, although instantly issued cards maintained a 5% to 10% advantage in all measures of activation and in cumulative levels of usage and total sales.
• Note: The data obtained in the ICI Pilot Study might be considered to be of a “baseline” nature, given that it does not reflect the effects of either a rewards program or a coordinated marketing campaign.
➢ 56% of mailed cards had been used for any offline transactions.
|[pic] |
➢ Instantly issued VCCs met or exeeded peer group norms and showed higher activation rates for offline and online transactions for the entire 180 days of the ICI Pilot in comparison to cards that were mailed.
| |
|[pic] |
| |
|[pic] |
| |
|[pic] |
Can ICI Increase Card Usage and Sales?
Survey Results
Influencing Factors
Key Considerations
• Visa Operating Regulations
• Visa Security Standards
• Branch Operations and Risk Management
• Technology Requirements (Hardware and Software)
• Cardholder Education
• Card Types / New and Replacement Cards
• Branch Selection
• Business Case Drivers
Visa Operating Regulations
Card embossing and encoding
Visa Security Standards
Physical and logical security
Reporting requirements
Branch Operations and Risk Management
A careful review of operational issues is essential to maximize the benefits of ICI and minimize the risks associated with remote issuance of VCCs. The operational considerations are not trivial and require managing card stock, securing the embossing equipment, and optimizing branch resources to support card production. The challenges include:
➢ Significant training of CSRs and other personnel that will result in confident operation of the ICI system.
• Open and fund new DDA accounts.
• Issue cards and activate them for immediate offline use.
• Motivate cardholder behavior as part of a customer relationship strategy.
➢ Visa has developed Instant Card Issuance Security Standards to ensure that issuer’s maintain and adequate level of security and audit control. These standards require an issuer to:
• Carry adequate liability insurance to cover any risk within or associated with their ICI program.
• Submit a complete Visa Instant Card Issuance Self-Audit form to Visa U.S.A. Risk Management annually for each remote location that has any product or component related to the instant issuance program.
• Members are advised to analyze their risk exposure in relation to potential revenue from offering instant card issuance.
Technology Requirements
In order to issue Visa Check cards in a branch setting, it is necessary to install card embossing equipment, PIN pads, and instant issuance application software.
➢ An ICI system can be installed to operate in either a stand-alone mode or integrated with an issuer’s host DDA and card management system. An example of each configuration is shown below.
|Stand-Alone System |Integrated System |
| | |
| | |
| | |
| | |
| | |
| | |
|Insert graphic |Insert Graphic |
| | |
| | |
| | |
| | |
| | |
| | |
|Low cost solution that can be operational in less than two months. |Designed for seamless operation with issuers IT infrastructure. |
|Off-the-shelf software |Available third party software must be customized, delaying |
|Requires manual data entry of basic card data into the issuer’s host |deployment. |
|system. |Provides operational efficiency and ease of use for branch personnel.|
|Represents a first step in launching a program or determining |Development costs may be significant. |
|feasibility | |
➢ Industry standard hardware is available that features embossing, magnetic stripe encoding, and color topping, with optional indent printing and smart card personalization capabilities.
• Card production is password protected as well as device access for replacing or removing card stock.
• A PIN pad attaches to the card embossing device to enable new cardholders to select their PINs.
• A non-resettable card counter is provided for audit-trail purposes.
• Equipment securely bolts to countertop to prevent theft.
➢ The basic software components necessary for an instant issuance system are shown below:
• Client/Server Design. Ability to support centralized management and audit reporting to manage system access and handling of card stock. Financial keys (PIN/CVV/CVC) can be stored securely at a data center and don’t require distribution to any hardware devices at the branch level. Embossing machines may be controlled from a central PC that can verify online status of the equipment.
• Management of Card Inventory. Access to card stock stored inside the embossing machine is regulated. Each card issuing location can be quickly audited to confirm operational compliance, specifically when and by whom each type of card was last balanced.
• Centralized Control of Security Settings. Users of the system may be easily added and existing access privileges modified. Card issuance capability may be restricted to specific card types, branches, or PC’s. For example, some employees may be able to produce cards, but not balance card stock or open the embossing machine.
• Customer Selected PINs. Customers can select PINs in the branch and the PIN offset can be encoded on the magstripe of the card. The host database can be updated in real-time with the customer selected PIN offset data.
• Flexibility in Card Production. Embossed cards can be ordered and produced in a single location, or card orders may be routed to an embossing machine located elsewhere. The card order can be printed immediately, or the order can sit in a “queue” until someone with security clearance prints the cards from the queue.
Cardholder Education
Card Types / New and Replacement Cards
Business Case Drivers
Background Considerations
Determining the financial benefits that may derive from an instant issuance program requires a complex analysis of a variety of business case drivers.
➢ Instance issuance can potentially impact the number of VCCs issued and it lowers the time it takes for new cardholders to start using their VCCS for debit purchases. ICI also provides a platform for issuing a variety of other card types.
➢ The ICI Pilot Study suggests that increased rates of penetration, activation, initial card usage and sales provide the basis for developing a business case.
➢ The advantages of enhanced customer satisfaction and innovative branding opportunities are difficult to quantify; however, new cardholders who received instantly issued cards during the ICI Pilot Study indicated very high levels of satisfaction from being able to get their cards instantly. An ICI program that is launched in “marketing isolation” could require years to obtain a return on investment.
➢ Every issuer will likely have unique criteria for projecting return on investment (ROI) and the possible economic justification for large scale implementation. Competitive pressures, marketing goals, and degree of emphasis on retail banking can all influence the decision to launch a program.
Estimating Major Investment Costs
➢ The nature of the issuer’s investment can be quantified to a large extent by examining the technology costs and operational impacts of instant issuance.
➢ The hardware and software technical requirements could amount to as much as $10,000 to $13,000 per branch and depend on the degree of software development and integration.
• Software expense is an extremely crucial variable because the success of the ICI system will depend on the degree to which it is operationally integrated with existing DDA opening procedures.
• Operational and technical expense may be required to enable “instant activation” of a VCC to allow immediate use for offline debit transactions.
• Security and risk management requirements (such as branch wiring, installation of security cameras, and secure storage of card stock) should be taken into consideration.
• Technology costs will likely go down in the foreseeable future as new options become available for utilizing “flat cards” that feature customized graphics and simplify instant issuance of multiple card types.
Calculating Return on Investment (ROI)
The instant issuance business model depends on assumptions regarding key VCC performance metrics. The following variables are used in a baseline analysis of the potential financial benefits of an ICI program.
| | | |
|Total Visa Check cards issued. | |Basic per branch analysis – showing how ICI can increase |
| | |interchange income to $6-7 per month based on increase |
|Penetration rates. | |activation and early benefits– with costs of about $10,000 |
| | |per branch – etc – |
|Offline and online activation rates. | | |
| | |List assumptions made etc. Show displaceable costs etc. |
|Offline transaction volumes. | | |
| | | |
|Interchange income per offline transaction. | | |
| | | |
|Card issuance costs | | |
| | | |
|Consumables costs. | | |
| | | |
|Enhanced security costs for items such as cameras and storage of card stock. | | |
| | | |
|Soft costs of user training and branch staff labor. | | |
Quantifiable Drivers Example Calculation
Other Business Drivers
➢ Brand differentiation
➢ New customer acquisition as a result of convenience
➢ New customer acquisition as a result of perceived security
➢ Ability to shape cardholder behavior (faster time to first offline and online transaction)
➢ Customer retention, reduced account attrition (emergency replacement of lost/stolen cards)
Technology Requirements
In order to issue Visa Check cards in a branch setting, it is necessary to install card embossing equipment, PIN pads, and application software.
➢ An ICI system can be installed to operate in either a stand-alone mode or integrated with an issuer’s host DDA and card management system. An example of each configuration is shown below.
|Stand-Alone System |Integrated System |
| | |
| | |
| | |
| | |
| | |
| | |
|Insert graphic |Insert Graphic |
| | |
| | |
| | |
| | |
| | |
| | |
|Low cost solution that can be operational in less than two months. |Designed for seamless operation with issuers IT infrastructure. |
|Off-the-shelf sofware |Available third party software must be customized, delaying |
|Requires manual data entry of basic card data into the issuer’s host |deployment. |
|system. |Provides operational efficiency and ease of use for branch |
|Represents a first step in launching a program or determining |personnel. |
|feasibility |Development costs may be significant. |
➢ Industry standard hardware is available that features embossing, magnetic stripe encoding, and color topping, with optional indent printing and smart card personalization capabilities.
• Card production is password protected as well as device access for replacing or removing card stock.
• A Pin pad attaches to the card card embossing device to enable new cardholders to select theirPINs.
• A non-resettable card counter is provided for audit-trail purposes.
• Equipment securely bolts to countertop to prevent theft.
➢ The basic software components necessary for an instant issuance system are shown below:
• Client/Server Design. Ability to support centralized management and audit reporting to manage system access and handling of card stock. Financial keys (PIN/CVV/CVC) can be stored securely at a data center and don’t require distribution to any hardware devices at the branch level. Embossing machines may be controlled from a central PC that can verify online status of the equipment.
• Management of Card Inventory. Access to card stock stored inside the embossing machine is regulated. Each card issuing location can be quickly audited to confirm operational compliance, specifically when and by whom each type of card was last balanced.
• Centralized Control of Security Settings. User’s of the system may be easily added and existing access priviledges modified. Card issuance capability may be restricted to specific card types, branches, or PC’s. For example, some employees may be able to produce cards, but not balance card stock or open the embossing machine.
• Customer Selected PINs. Customers can select PINs in the branch and the PIN offset can be encoded on the magstripe of the card. The host database can be updated in real-time with the customer selected PIN offset data.
• Flexibility in Card Production. Embossed cards can be ordered and produced in a single location, or card orders may be routed to an embossing machine located elsewhere. The card order can be printed immediately, or the order can sit in a “queue” until someone with security clearance prints the cards from the queue.
•
Branch Operations and Risk Management
A careful review of operational issues is essential to maximize the benefits of ICI and minimize the risks associated with remote issuance of VCCs. The operational considerations are not trivial and require managing card stock, securing the embossing equipment, and optimizing branch resources to support card production. The challenges include:
➢ Significant training of CSRs and other personnel that will result in confident operation of the ICI system.
• Open and fund new DDA accounts.
• Issue cards and activate them for immediate offline use.
• Motivate cardholder behavior as part of a customer relationship strategy.
➢ Visa has developed Instant Card Issuance Security Standards to ensure that issuer’s maintain and adequate level of security and audit control. These standards require an issuer to:
• Carry adequate liablity insurance to cover any risk within or assoicated with their ICI program.
• Submit a complete Visa Instant Card Issuance Self-Audit form to Visa U.S.A. Risk Management annually for each remote location that has any product or component related to the instant issuance program.
• Member’s are advised to analyze their risk exposure in relation to potential revenue from offering instant card issuance.
Evaluating the Business Case for Instant Issuance
❖ Background Considerations
Determining the financial benefits that may derive from an instant issuance program requires a complex analysis of a variety of business case drivers.
➢ Instance issuance can potentially impact the number of VCCs issued and the way in which a card is used. ICI also provides a platform for issuing a variety of other card types.
➢ The ICI Pilot suggests that increased rates of penetration, activation, and initial card usage and sales provides a basis for developing a business case.
➢ The advantages of enhanced customer satisfaction and innovative branding opportunities are difficult to quantify. An ICI program that is launched in “marketing isolation” could require years to obtain a return on investment.
➢ Every issuer will likely have unique criteria for projecting return on investment (ROI) and the possible economic justification for large scale implementation. Competitive pressures, marketing goals, and degree of emphasis on retail banking can all influence the decision to launch a program.
❖ Estimating Major Investment Costs
➢ The nature of the issuer’s investment can be quantified to a large extent by examining the technology costs and operational impacts of instant issuance.
➢ The hardware and software technical requirements could amount to as much as $10,000 to $15,000 per branch and depend on the degree of software development and integration.
• Software expense is an extremely crucial variable because the success of the ICI system will depend on the degree to which it is operationally integrated with existing DDA opening procedures.
• Operational and technical expense may be required to enable “instant activation” of a VCC to allow immediate use for offline debit transactions.
• Security and risk management budgetary items such as …… are significant
• Technology costs will likely go down in the foreseeable future as new options become available for utilizing “flat cards” that feature customizable graphics and simplify instant issuance of multiple card types.
❖ Calculating Return on Investment (ROI)
The instant issuance business model depends on assumptions regarding key VCC performance metrics. The following variables are used in a baseline analysis of the potential financial benefits of an ICI program.
| | | |
|Total Visa Check cards issued. | |Basic per branch analysis – showing how ICI can increase |
| | |interchange income to $6-7 per month based on increase |
|Penetration rates. | |activation and early benefits– with costs of about $10,000 |
| | |per branch – etc – |
|Offline and online activation rates. | | |
| | |List assumptions made etc. Show displaceable costs etc. |
|Offline transaction volumes. | | |
| | | |
|Interchange income per offline transaction. | | |
| | | |
|Card issuance costs | | |
| | | |
|Consumables costs. | | |
| | | |
|Enhanced security costs for items such as cameras and storage of card stock. | | |
| | | |
|Soft costs of user training and branch staff labor. | | |
Quantifiable Drivers Example Calculation
Other Business Drivers
➢ Brand differentiation
➢ New customer acquisition as a result of convenience
➢ New customer acquisition as a result of perceived security
➢ Ability to shape cardholder behavior (faster time to first offline and online transaction)
➢ Customer retention, reduced account attrition (emergency replacement of lost/stolen cards)
Best Practices – NEW SECTION
• Strategies and Tactics that help things go better
o What groups in the bank should be involved in launching and supporting a program?
o Branch incentives for CSRs to motivate them
o Refresh training for branches 30-60 days after launch
• Things to avoid
o Manual data entry
• Tools
o Visa Security Standards
o Runge & Company
o VAR information?!?
Latest Developments in Instant Issuance (just some ideas below)
• Preferred Vendor Partnerships
• Magtek’s Newest Embosser
• Non-embossed Flat Cards
• RFID
The Future of Instant Issuance
The payment industry is increasingly driven by offers of expediency, immediacy, and the value of delivering products instantly. Instant card issuance is more than a technology that replaces the mailing of VCCs. It represents a new business model for spawning innovative programs that capitalize on the industry’s emphasis on consumer-friendly retail banking. ICI is a foundation for supporting:
➢ “On-demand” customer relationship strategies that enhance the ability to capture digital transactions at the origin of the banking relationship.
➢ Marketing synergies with incentive programs such as Visa Extras, Instant Visa Rewards and other innovative programs that seek to motivate and shape cardholder behavior.
➢ Instant issuance of Visa branded campus cards, credit cards, and prepaid debit applications such as payroll cards that are funded at the network level and issued at a bank branch or an employer location.
➢ Convergence with other emerging technologies driven by increased customer expectations. Instant issuance is a model for future “on-site” personalization programs that might involve contactless cards, phones, or other wireless devices.
Visa’s Role
The decision to implement an instant issuance will depend on issuer goals. The business case for instant issuance requires quantitative assumptions, judgements about marketing strategies, and technical considerations.
➢ Visa is committed to providing guidance to promote secure instant issuance programs that minimize risk and fraud.
➢ Visa DPS offers innovative products and services that can significantly enhance an instant issuance program.
➢ Visa is prepared to conduct further research on the value of instant issuance applications.
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PILOT STUDY ANALYSIS
Instant Card Issuance (ICI) Pilot Study Review
History and Background of Instant Card Issuance
Examples of Successful ICI Programs
Why Visa Launched the ICI Pilot
Key Issues Addressed in the ICI Pilot
Issuer Interest in ICI
How the ICI Pilot was Organized
Formal Research Design
Branch Procedures
New Account Survey
ICI Pilot Sampling Procedures
How the Data was Analyzed
Special Notes for Interpreting Results
Results
Initial Card Activation
Activation by Transaction Type
Longer Term Cardholder Behavior
Cumulative Analysis
Transaction Profiles
Power Scores
Other Potential Interactions
New Account Survey Results
What the ICI Pilot Study Says About Instant Issuance
Limitations of the ICI Pilot
Suggestions for Further Research
Appendix
History and Background
Visa started providing formal security requirements for instant issuance in 1998 when several issuers began to technically develop ICI systems and distribute VCCs using in-branch hardware and software.
• While few large issuers have implemented instant issuance to any significant degree (e.g. at more than 100 branches), most tier-one banks are actively studying ICI and have requested that Visa provide information and guidance.
• ICI systems have been installed at hundreds of credit unions. Credit unions have had the most experience with ICI primarily because their IT infrastructure is far less complex than a large bank’s.
• Visa supports Instant issuance in specialized applications such as campus card programs where a VCCVCC functionality is added to an institutional identification card.
• ICI “smart card” applications have been reported in Europe and elsewhere.
Examples of Successful ICI Programs
• Desert Schools Credit Union- Instant Issuance VCC (Phoenix, AZ)
o Launched in 2003 by a $2.7 billion credit union at 30 branches in the greater Phoenix area.
o The program has grown to over 54 branches and includes locations in retail establishments such as WalmartWal-Mart. Approximately 9,000 VCCs are issued each month.
o More than 400 employees of Desert Schools FCU now are involved in instant issuance in some capacity.
o At stand-alone branches, member service representatives issue the cards. At branches located in retail environments, MSRs/tellers have been trained to do this task.
o Dual controls—having more than one person's password required to issue cards and to take out the plastic stock in the morning—helps limit the potential for fraud.
o The credit union uses an instant-issuance system called CardWizard® that is provided by Dynamic Card Solutions and each branch has a SuperCAT™ encoder and DataCard® 150i card embosser.
o New cards are “instantly” activated for offline debit because the credit union processes with Visa DPS.
o Desert Schools believes the main benefit is that the customers are pleased that they can use their new VCC immediately when they open an account.
• Wachovia Bank- Instant Issuance Campus Card (Chapel Hill, NC)
o This Visa-branded, photo identification card is issued by the university card office on campus at UNC Chapel Hill.
o Known as the “UNC One Card Plus,” it allows the cardholder to make purchases from a proprietary declining balance account, pay for printing and photo copies, and access campus facilities via magstripe-based card readers.
o The card works at ATM machines and for online and offline point-of-sale transactions campus.
o A cardholder can make “real-time” funds transfers via a VRU-based system from a Wachovia account (including checking, savings, line of credit or credit card) to the cardholder’s declining balance account, with immediate funds availability.
• Commerce Bank- Instant Issuance VCC (NJ, NY, DE, PA, VA)
o The bank is using MagTek’s IntelliCAT® system to instantly issue Visa debit cards to both new and existing customers at over 300 branch locations.
o This system consists of Windows®-based software, a MagTek IntelliPIN and a Datacard® 150i desktop embossing machine.
o Customers are also able to select their own PINs when they get their cards.
Why Visa is Studying ICI
• There are no published reports raboutabout the benefits of instant issuance that are based upon empirical studies of cardholder behavior or systematic analysis of an issuer’s ICI program.
• A significant volume of anecdotal information exists which suggests that customers appreciate the convenience of obtaining a VCC at the time an account is opened and tend to start using their cards quickly.
• Other benefits that have been suggested include increased penetration, higher long terms activation rates, and increased usage for offline POS.
• The various business models that have been proposed to justify ICI are based upon developing and executing innovative customer relationship strategies in an increasingly “on-demand” world. ICI might offer the ability to promote such strategies and capture debit card transactions at the origin of the banking relationship.
• ICI business models are largely based on the supposed advantages of a faster, more customer-focused way of delivering cards.
➢ Instant issuance could enable a bank to make more memorable first impressions with new customers, or meet increased expectations of existing customers.
➢ Instant issuance could be vertically “integrated” with reward programs and other promotional initiatives and incentives to attract, retain, and motivate customers.
Some of the other potential benefits that have been suggested to justify ICI include:
• ICI differentiates the issuer in a “commoditized” retail banking marketplace.
• Customer satisfaction and retention are enhanced when customers do not have to wait for new cards to arrive by mail, especially after a card has been de-magnetized or reported as lost or stolen.
• ICI eliminates any potential “delay period” between when a customer service representative opens a checking account and when the VCC is actually ordered / mailed / delivered / activated by the cardholder.
• The risk of fraud loss and identity theft is measurably lower for instantly issued VCCs, compared to cards sent by mail. Furthermore, customer “perception” is that they feel safer getting a card in person while in the branch.
• A significant portion of card production costs related to mailed cards can be “displaced” by instant issuance. This includes the costs of card stock, embossing, encoding, and color tipping. Other costs are “avoidable”, such as the cost of producing customized card mailers (plus postage) and PIN mailers (plus postage), as well as the cost of producing temporary ATM cards in the branch for new customers.
• ICI offers issuers the opportunity to increase participating in a debit rewards program by enrolling them immediately at the time of account opening.
• Card-based online banking authentication could be supported via a biometric or another credential stored on a chip or magstripe, immediately after account opening.
• The ICI “infrastructure” offers issuers the ability to “add” other instant issuance programs at a later date, such as photo cards, gift cards, credit cards, payroll cards, and contactless cards.
• Issuers will process fewer checks.
Key Issues Addressed in the ICI Pilot
The ICI Pilot was designed to explore various issues related to both cardholder behavior and the potential benefits to the issuer. These issues included:
• The extent to which ICI accelerates actual card activation and use.
• The longer term, or sustained effects of ICI in terms of measurable advantages to the issuer using standard cardholder performance metrics.
• Cardholder satisfaction with ICI.
• Technical and operational challenges to launching an ICI program
• Evaluating the business case in terms of observable benefits, empirical data, and other relevant factors.
Issuer Interest in ICI
This section will be consolitdated and presented in a table.
The ICI Pilot investigated the interest of large Visa debit issuers in future implementation of instant issuance. A significant number of issuers indicated an interest in evaluating and/or implementing ICI systems, as summarized below:
1. Commerce Bank (Mo.)
ICI pilot participant. Intends to purchase the instant issuance pilot systems “loaned” to the bank by their instant issuance vendor so that the bank can continue with instant issuance in 2007. Several of the participating pilot branches voiced strong support for continuing with instant issuance at the conclusion of the pilot term.
2. Wachovia Bank
ICI Pilot participant. Two branches in Jacksonville, FL have been instantly issuing VCCs for several years. The bank also instantly issues Visa-branded campus cards at several North Carolina universities, including UNC Chapel Hill, UNC Greensboro, and NC A&T.
3. Bank of America
The bank has piloted instant issuance of embossed cards in two metro markets since mid-2005, and plans to conduct a pilot study in Dallas in 2007 involving the instant issuance of VCC “flat” (non-embossed) cards at 20+ branches.
4. Wells Fargo
Decided not to participate in the pilot due to anticipated systems development impacts and competing project priorities. The bank is currently evaluating instant issuance of debit cards in combination with contactless capability, potentially in the form of a flat card.
5. U.S. Bank
Decided not to participate in the pilot due to anticipated systems development impacts and competing project priorities. Preparing to deploy Visa-branded, instant issue campus card program.
6. TCF Bank
Decided not to participate in the pilot due to competing project priorities.
7. SunTrust Bank
Decided not to participate in the pilot due to competing project priorities.
8. BB & T
Decided not to participate in the pilot due to competing project priorities, but is actively considering a small program in 2007.
9. PNC
Decided not to participate in the pilot due to issues with DDA account opening process and delays with card record build at debit processor (FDR). Seeking funds in 2007 for instant issuance program.
10. TD Bank North
Decided not to participate in the pilot, but has approved funds for 2007 to launch a flat card instant issuance program.
11. Sovereign Bank
Decided not to participate in the pilot due to issues related to DDA opening process and challenges with integrating instant issuance software into existing process for card number assignment.
12. Compass Bank
Decided not to participate in the pilot due to competing project priorities, but is actively considering launching a Visa-branded instant issue campus card program in 2007.
13. Webster Bank
Decided not to participate in the pilot due to competing project priorities, but is actively considering a small program in 2007, possibly with flat cards.
14. First Citizens (NC) Bank
Decided not to participate in the pilot due to competing project priorities and anticipated systems development impacts with their debit processor (FDR).
15. First Tennessee Bank
Decided not to participate in the pilot.
How the ICI Pilot was OrganizedDone
This section to be developed further to describe in more detail the preliminary steps to launching the project
• Organization for the ICI Pilot Study began in March of 2005 in response to the interest expressed by several large issuers in evaluating the benefits of instant issuance.
• Visa engaged Runge & Company (), a consulting firm specializing in instant issuance, to assist in research design, project implementation, and analysis of the results
• Three vendors, Dynamic Card Solutions, DemoTeller Systems Inc., and Magtek offered to provide discounted hardware and software for the project.
• The opportunity to participate in the study was formally presented to numerous issuers.
• Because participation in the ICI Pilot involved extensive technical and operational commitments that had to occur outside of the normal “budget” planning process, Wachovia and Commerce were the only banks able to participate.
➢ Commerce Bancshares selected Dynamic Card Solutions to supply the necessary hardware and software for the project, which was offered at no charge for a 6-month term.
➢ Wachovia already was operating instant issuance systems at several branches in Florida using Magtek software, mainly for the purpose of providing replacement VCCs to customers.
Formal Research Design
The study and subsequent analyses reflected a 2 (banks) x 2 (control vs. test) X 6 (months) repeated measures design in which data was collected for multiple dependent variables including:
• Penetration Rate
• Days to First Offline Purchase Transaction
• Days to First Online Purchase Transaction
• Online and Offline Activation Rates
• Online and Offline Transactions per Issued and per Active VCC
• Online and Offline Sales Dollars (including Average Ticket) per Issued and per Active VCC
• Offline / Online POS Transaction Mix
Branch Procedures
• Managers at the Wachovia and Commerce test branches were given instructions to train Customer Service Representatives (CSRs) on how to instantly issue VCCs, and to proactively offer encourage instantly issued VCCs to all new customers at the time of DDA opening.
• The CSRs were also instructed to educate new cardholders on the features and benefits of the VCC, in order to encourage signature-based debit behavior. The training strategy utilized for the ICI Pilot Study is illustrated in much greater detail in the following exhibits:
❖ Exhibit II: Pre-Pilot Questionnaire Given to Wachovia Test Branch Employees (page 4341);
❖ Exhibit III: Pre-Pilot Sales Training Strategy for Wachovia Pilot BranchesExhibit III: Pre-Pilot Sales Training Strategy for Wachovia Pilot Branches (page 4644);
❖ Exhibit IV: Script for Wachovia Employees in Test Branches (page 4846).
• After the DDA was opened and the VCC card issued, each customer received a new account kit that included disclosure statements and marketing collateral. The new account kits varied slightly by bank:
[Need to confirm new account materials and customer communications, get electronic copies]
Wachovia
▪ Check Card Register
▪ Visa Extras Insert
▪ Confirm IVR included with mailed cards
Commerce
▪ Lay by card
▪ Card presenter
▪ Does not participate in Visa Extras
▪ No IVR offered
New Account Survey
New customers were asked to complete a brief New Account Survey, a sample of which is shown in Error! Reference source not found..
[pic]
ICI Pilot Sampling Procedures
The ICI Pilot Study audience sample was comprised of 5,325 customers from Wachovia Bank (FL) and Commerce Bank (MO) who opened new DDA accounts between May 1, 2006 and October 31, 2006.
• Data was collected for a period of 180 days from multiple branches at each bank.
• Each branch was classified as either a test branch or a control branch.
• At test branches, customers received instantly issued VCCs at the time they opened their new DDAs.
• Customers at control branches received VCCs via the mail according to each bank’s normal card issuance process.
• Wachovia provided four branches (two each for control and test) and Commerce provided twenty branches (ten each for control and test).
|Wachovia |Commerce |
|Test Branches |Control Branches |Test Branches |Control Branches |
|(Qty 2)[1] |(Qty 2) |(Qty 10) |(Qty 10) |
| | | | |
|338 DDA Account |723 DDA Accounts |1611 DDA Accounts |3153 DDA Accounts |
|ICI |Mailed |ICI |Mailed |
|365 |633 |1611 |2707 |
How the Data was Analyzed
The data was analyzed using a “lifecycle” technique that offered the ability to investigate the effects of ICI upon cardholder behavior over time.
• The analysis looked at cardholder data from the time a DDA account was opened until November 30, 2006.
• Because the ICI Pilot involved continuous additions to the sample on a daily basis, the data was arranged in such a way that each subject had a common relative start date even though calendar start dates were different.
• Six groups of subjects were designated for analysis corresponding to 30, 60, 90, 120, 150, 180 days duration from the time of DDA opening
| |Wachovia |Commerce |
| |Instant |Control |Instant |Control |
|30 Day |338 |723 |1611 |3153 |
|60 Day |328 |693 |1559 |3015 |
|90 Day |276 |557 |1308 |2561 |
|120 Day |224 |451 |1051 |2086 |
|150 Day |157 |334 |733 |1495 |
|180 Day |108 |207 |473 |943 |
• The lifecycle technique allowed the same groups of subjects to be tracked using a variety of measures that could be reviewed at various periods, and cumulatively.
➢ For example, data in the 120-day lifecycle group included those subjects who had DDA accounts which had been opened for at least 120 days.
➢ Data was analyzed using repeated measures on the same subjects within a lifecycle group, and comparisons could be made between the six different lifecycle groups.
➢ The 30 day group contained the most cardholders because it included six “first month’s” of data (May through October).
➢ The 180 day group contained the smallest number of cardholders because it included only those subjects who opened DDA accounts during May 2006 (the first month of the study) that were tracked for six months.
The data organization plan is presented in
➢ Exhibit IExhibit I (page 4341).
• Data from the two bank samples was analyzed separately.
➢ The sample sizes and the number of participating branches from the two banks were substantially different.
➢ ICI systems and procedures employed at each bank were not identical.
• Data obtained from the Commerce and Wachovia samples is presented below. The results include 180 days of data collected from cardholders who opened DDA accounts between May 1, 2006 and October 31, 2006. Branch-level summaries for each of the 20 Commerce branches are shown in the appendix.
|[pic] |
Commerce Bank
Wachovia Bank
|[pic] |
Special Notes for Interpreting the Results
• More data is available for the first thirty days of card activity because new cardholders were continuously added until the end of October of 2006.
• There is less data available for cardholder activity at 180 days because only about 28% of the sample (only those cardholders who got cards in May, the first month of the study) participated for the entire length of the study.
• Some results are presented below in the form of cumulative comparisons over different periods of time.
➢ Cumulative results are particularly relevant to this study because of the importance of looking at the effect of ICI on cardholder behavior over time with respect to transactions and spending.
➢ Sample size within each lifecycle group remains the same for each time period because it is representative of the same cardholder’s behavior at the different intervals.
• Because difference in activation rates is a key focus of the study, activation rates per VCC issued are provided in the cumulative analyses.
• For purposes of investigating a potential business case for instant issuance, transactions and sales dollars per VCC issued are also presented in cumulative analyses.
Card Activation
❖ Initial Activation in the First Thirty Days Post DDA
➢ Average days to first transaction were significantly faster for ICI cards than mailed cards for both Commerce and Wachovia - for both offline and online transactions.
|[pic] | |[pic] |
Commerce Wachovia
➢ Differences in activation (completing the first purchase transaction) is clearly revealed in comparing the frequency distribution data between the test and control groups for both Commerce and Wachovia
- Insert Commerce Frequency Distribution Here –
-
Wachovia
[pic]
➢ The pattern of activation for both groups is skewed in the direction of the DDA opening date for both groups.
➢ Both groups show a proportion of cardholders who delay activation for lengthy periods after obtaining their cards, tending to increase the average first transaction dates for both groups. The test group has a large number of cardholders who are very active immediately and take advantage of the opportunity to use their cards. Need median and mode statistics.
➢ The control group shows a high proportion of cardholders that begin using their cards quickly when they get them in the mail (approximately 10 days after DDA opening).
❖ Initial Offline Activation
➢ ICI was associated with rapid offline activation as more than one-third of the test group completed an offline transaction within five days of opening a DDA – and half of the test group completed an offline transaction within 10 days of opening a DDA.
➢ Control groups did not achieve 50% offline activation until nearly 24 days after DDA opening).
[pic]
Commerce
Wachovia
[pic]
❖ Initial Online Activation
➢ The pattern for online activation in the first thirty days post DDA was similar to the offline results. Instant issuance produced advantages for both the Wachovia and Commerce samples, with Wachovia having slightly higher rates.
[pic]
Commerce
Wachovia
[pic]
❖ Longer Term (180 Day) Activation Trends
➢ In the first sixty days after DDA account opening, instantly issued cards had higher activation levels than mailed cards for both offline and online transactions for both banks. This trend continued for Commerce Bank for the duration of the study (180 days post DDA).
[pic]
Commerce
Wachovia
[pic]
➢ After sixty day, activation rates for Wachovia began to diverge from those observed for Commerce and from established norms in unexplained patterns:
1. Control group cards for Wachovia began to show higher levels of activation than test cards 90 days post DDA.
2. In the Wachovia sample, activation rates for both control and test cards showed increasing decrements from 90 to 180 days post DDA and activation rates for all transactions for both groups dropped below 40%.
3. These results suggest either attrition problems or procedural errors that require investigation.
Cumulative Activation Rates
➢ Cumulative activation rates show that over the first 90 days post DDA, instantly issued cards were more likely to be used than mailed cards for at least one transaction for both Commerce (85% vs. 74%) and Wachovia (85% vs. 79%).
[pic]
Commerce
Wachovia
[pic]
Transaction Volumes
➢ Transactions per active VCC indicated a strong effect of ICI in the first 30 days post-DDA.
[pic] [pic]
➢ Commerce test cardholders had slightly more transactions than Wachovia test cardholders in the first thirty day for both offline and online transactions.
➢ After thirty days, instant issuance did not appear to affect either volume or mix of offline and online transactions in any systematic way.
➢ Offline transactions exceed online volumes and Commerce tended to have a slightly higher overall transaction volume than Wachovia.
• Cumulative Transactions Per VCC Issue
➢ Test group VCCs were used for 2-3 offline transactions before the first Control group members started using their cards at all for both Commerce and Wachovia.
[pic]
Commerce
Wachovia
[pic]
➢ The gap between test and control was greater for Commerce than Wachovia over the first ninety days. In the Commerce sample the gap increased from 3.1 transactions at day 15 to 5.5 transactions at day 90. The cumulative Wachovia gap remained at about 2 offline transactions.
➢ The cumulative differences in transaction volume tends to highlight the magnitude and persistence of the initial effect of ICI on cardholder behavior.
Sales
➢ Total sales for instantly issued cards were higher in the first thirty days for both Commerce Bank and Wachovia.
➢ For both banks, offline and online sales were over $100 greater per active VCC for test groups. The highest sales in the first thirty days was for Wachovia’s instant issue group ($453) which had a $163 advantage over mailed card.
[pic]
[pic]
➢ The overall sales results over 180 days post DDA (per active VCC) presented a complex picture with few systematic patterns. Online sales for test cards at Commerce were consistently higher than control cards. Wachovia sales for both transaction types were higher than Commerce.
• Cumulative Sales Results Per Card Issued
➢ At the end of 30 days, the Commerce test group averaged $121 more in cumulative offline sales than the control group. Wachovia’s test group averaged $161 more than mailed cards
➢ The average test VCC accounted for about $100 in offline sales before the average control VCC completed a single offline purchase.
[pic]
Commerce
Wachovia
[pic]
➢ After thirty days, the gap in cumulative sales between the two groups for both banks slightly increased. At 90 days post DDA the gap was $175 for Commerce and $204 for Wachovia.
• Power Scores Pending
• Statistical Tests of Significance
➢ Statistical analysis of the study data (a 2 (Banks) X 2 (Test vs. Control) X 6 (Time Interval) factorial design with repeated measures) could be performed using multiple regression techniques if assumptions were made regarding total sample size, sampling inequality, and any necessary pooling of data.
New Account Survey Results
The primary objective with the new account survey was to determine customer’ reactions to receiving their new Visa check cards at the bank, instantly, when opening a new checking account, versus receiving the card in the mail at home a few days later. Survey questions were developed to gauge customers’ perceptions about potential safety and convenience benefits of instant issuance.
• Among new checking account customers surveyed, most felt that getting a VCC instantly issued at the branch was safe and convenient; and, getting a VCC at the branch was considered safer and more convenient than getting it in the mail.
➢ Most (70%) of the new account customers indicated that receiving a card at the branch felt safer than receiving it in the mail at home; 46% of the total said getting it at the branch felt “a lot safer.”
o 26% said both methods were equally safe, only 4% say that it was safer to get a card in the mail.
o The reasons why it was safer to get a card at the branch included not only security/safety reasons but also, at a lower level, convenience reasons (e.g., fast, easy).
➢ Among total customers surveyed, 78% said that receiving the card at the branch was more convenient overall, compared to receiving it in the mail.
o 9% felt that it was more convenient to get a VCC in the mail.
Detailed descriptions of the survey results are found in the Appendix:
❖ Exhibit VI: New Account Survey- Which Method Feels SaferExhibit VI: New Account Survey- Which Method Feels Safer (page 5150);
❖ Exhibit VII: New Account Survey- Extent of Feeling Safer When Receiving Card at BankExhibit VII: New Account Survey- Extent of Feeling Safer When Receiving Card at Bank (page 5251); and,
❖ Exhibit VIII: New Account Survey- Which Method Feels More ConvenientExhibit VIII: New Account Survey- Which Method Feels More Convenient (page 5352).
What the ICI Pilot Says About Instant Issuance
The ICI Pilot study was an exploratory investigation of the effect on cardholder behavior of instantly issuing a Visa Check Card at the time a DDA account was opened. The study provided useful data that relates to potential issuer benefits and the business case for implementing instant issuance programs (see Part IV Business Case Evaluation).
The ICI Pilot Study produced at least eight major findings that are of potential interest to VCC issuers that are contemplating instant issuance.
1. The magnitude of the positive effects of ICI on early cardholder behavior is substantial. Results pertaining to first transaction date, activation rate, usage, and sales suggest potential advantages of ICI that may create opportunities for an issuer.
2. ICI cardholders were more likely to use their cards. The ICI group’s higher activation levels tended to explain differences in usage and spend.
3. ICI produced no apparent advantages with respect to offline usage or spend except for incremental differences influenced by higher offline activation.
4. There appeared to be no sustained effect of ICI in the ICI Pilot Study beyond the primary advantages in activation, usage, and spend that were evident in the first 30 to 45 days after DDA opening. With the exception of a small but consistent advantage in activation rates, longer-term effects were not evident in the data.
5. The cumulative advantages of ICI tended to highlight the extent of ICI’s large initial effect on cardholder behavior. The early cardholder performance advantages resulting from ICI appeared to be quite substantial relative to the time it took for Control group cardholders to approach similar cumulative levels of performance (90 days or more after DDA opening).
6. The New Account Survey results indicated a high level of satisfaction with ICI, as evidenced by the fact that respondents felt it was safer and more convenient to receive VCCs in the branch versus in the mail.
7. The 15 large Visa debit issuers who formally considered participating in this study all indicated a high degree of interest in ICI. The major limiting factor in both study participation and eventual implementation appears to be related to technology integration of ICI functionality and existing account opening processes (see Parts II & III).
8. ICI technology is rapidly evolving and now supports multiple card types including embossed cards, non-embossed “flat” cards, and contactless cards, all with the potential for adding customized card graphics to each card in the branch during card issuance.
Interpreting the Results Using Potential ICI Models
The ICI Pilot results can be interpreted in terms of an empirical performance model and a customer relationship model:
• Empirical Performance Model
➢ ICI has the effect of “priming the pump” in that it establishes an immediate output of transaction activity.
➢ The opportunity ICI provides to some cardholders is evident on the day the DDA account is opened.
➢ Cardholders who receive VCCs in the mail never match instant issuance activation rates or the cumulative levels of transactions and sales
➢ While the dramatic effect of ICI in the first 30 days after opening a DDA account diminishes with regard to specific cardholder behavior, implementing an ICI program may produce gains in an issuer’s monthly transaction metrics that are worth long term evaluation
• Customer Relationship Model
➢ The New Account Survey data collected in the ICI Pilot Study clearly indicated that new customers got value from receiving their Visa Check Cards at the time they opened their DDAs.
➢ Cardholder expectations concerning convenience and security - plus the perception of a special opportunity - may have created a degree of enthusiasm that translated into early activation.
➢ Over time all cardholder behavior profiles resembled normal bank performance averages and the value of ICI was no longer salient to the cardholder, except for the suggestion of a modest, but enduring activation echo observed in the data.
➢ Potentially, early ICI cardholder behavior could be sustained and reinforced through incentive rewards programs or special instructions about using a VCC.
➢ While the ICI Pilot provided important baseline information about cardholder behavior, it did not attempt to evaluate the benefits of specific customer relationship strategies.
Limitations of the ICI Pilot
The ICI Pilot Study represented “in the field” research with unique methodological challenges and procedural issues that may have affected the results to an unknown degree. Some of these challenges included:
➢ Total sample sizes
➢ Unequal sample size
➢ National or regional demographics in bank participation:
• Wachovia’s small number of FL branches on one metro market increased the potential impact from local demographics; e.g. seasonality, age of typical new customer (e.g. retirees versus college students).
➢ Design limitations inherent in real world experiments (including lack of uniform instructional set, lack of CSR compliance, and risk of biased or selective sampling):
• Even though every new DDA was supposed to receive a card instantly in the test branches, this was not the case. In fact, many branches barely instantly issuance 50% of their cards to new DDAs. Reasons for this may have included:
o Branch employee turnover, typical in most retail bank branches, could have impacted who got cards instantly, and who got cards by mail. If the employees in test branches were not well trained or confident with the process for how to instantly issue a VCC, they likely defaulted to “mailing” cards instead.
o It is likely that not all new customers in test branches were offered an instant VCC. Employees could have been biased in who they elected to produce an ICI card for- e.g. mailing a card to a “pushy” customer who was in a hurry, rather than taking the 60 seconds to make the card.
o Because the process for issuing cards requires some manual effort, it is possible that employees made fewer instant cards to “keep the new accounts line moving.”
➢ Wachovia participated in Visa Extras and offered IVRs (Instant Visa Rewards) in the VCC card mailers sent to customers from control branches [CONFIRM]. Commerce did not participate in Visa Extras, nor did they offer IVRs to any customers. This could have impacted card activation rates, and time to first use for each bank overall, or for test versus control.
➢ Some new customers who would have normally requested and received an ATM-only card likely received a VCC instantly in the branch, because it was convenient and was being actively offered by the bank employee. This type of cardholder likely was not pre-disposed to using the card for offline debit, and might have been less likely to use the card for any type of debit transaction.
• Commerce customers from both test and control branches with joint accounts share a card number.
➢ Technical problems
• Wachovia used older embossers with some history of mechanical problems and system reliability:
o The embossers had a history of maintenance problems and were not under a maintenance contract during the term of the pilot. If the machines were not working, then cards were mailed to test branch customers.
o Wachovia’s embossers were networked via a shared fax line, which, when in use, disabled the embosser, and resulting in a card being mailed.
➢ Technical differences in ICI systems could have impacted the customer experience:
• Each bank had different systems and timing issues associating with ICI cards. Wachovia VCCs worked the same day for ATM and online debit; one business day delay for offline debit. Commerce VCCs worked the next business day for ATMs, online and offline debit.
o Because the cards didn’t work for offline debit immediately after account opening, it was up to the branch employees to effectively communicate the “call to action” to the cardholder; e.g. Wachovia branch employees would have said “You can use your card today for PIN-based debit, but you need to wait until tomorrow to start using your card for signature-based debit.” Because this was a field study, it is impossibly to know how consistently and accurately the employees communicated this information.
o Furthermore, it is likely that some ICI cardholders from both Wachovia and Commerce waited an extra day or two to start using their VCCs for offline debit because they didn’t want to risk being “embarrassed” at the point of sale when their cards didn’t work.
Suggestions for Future Research
The ICI Pilot Study is a foundation for evaluating the business case for instant issuance. Subsequent research might focus on (1) the specific role of customer relationship strategies - rewards or instructional set - on card use, and (2) the efficiency and benefits of instantly issuing non-embossed flat cards.
Appendix
Exhibit I: Data Organization Plan
|Lifecycle |N |30 |60 |90 |120 |150 |
|120 | |…Plus |…Plus July in |…Plus July in |…Plus July in |
| | |New July |Aug |Sept |Oct |
|90 | |…..Plus New |…Plus Aug in |…Plus Aug in Oct|
| | |August |Sept | |
|60 | |…Plus New Sept |…Plus Sept in |
| | | |Oct |
|30 | |…Plus New Oct |
Exhibit II: Pre-Pilot Questionnaire Given to Wachovia Test Branch Employees
Q1: Describe the basic facts about how a instantly embossed card works
• Customers receive instantly embossed card after opening a DDA
• Instantly embossed card is immediately activated
• Customers CAN NOT use the card as a debit card for the first day
• Customers can use the card as an ATM Card; however, on the first day, customers can only withdraw funds up to $100
• Customers may use the instantly embossed card as a debit card after the first day they receive it
Q2: How do customers know about the instant card issuance service? Do employees promote this service?
• The service is not promoted in any way
• Most customers do not know about this service
• Most customers who know about this service are informed by other Wachovia centers
• If a customer is knowledgeable about the service and wants an instantly embossed card, branch employees will thoroughly screen the customers before issuing them an instant card
• The screening process is used to determine if the customer really needs the Check Card (emergency purposes) or if a customer has a notable relationship with the bank
• A customer who wants to deposits a substantial amount of money in his or her new DDA has a higher chance of being introduced to the instantly embossed card service
Q3: What percentage of Check Cards is actually instantly embossed? What percentage of instantly embossed cards is issued because of a referral from another Wachovia center?
• 20 Instantly embossed cards are produced weekly (highest average)
• Branch employees rarely suggest instant issuance services to the customers
• Customers are screened before being offered the service (As mentioned above)
• Currently, instant card issuance does not drive traffic into the branch because customers are unaware of this service
• Employees believe that if customers knew about the service, the amount of customers in the branch would drastically increase
• Almost all of the cards that are instantly embossed are because of referrals from other Wachovia centers
Q4: What percentage of your employees is trained to use the equipment? How long does it take for new employees to get up to speed on using the equipment? How long does it take to instantly emboss a card?
• All employees are trained to use the equipment in the Jacksonville Beach Office
• The machine is very easy to operate; therefore, it requires only a few minutes of training to use it
• It takes about 5 minutes to create an instantly embossed card
Q5: What do employees like about the instant issue process? What would employees change about the process?
• Employees like the satisfaction it gives the customer
• Employees would like to produce the customer’s picture on the instantly embossed card
Q6: How often are employees NOT able to issue cards due to machine malfunction or employee unavailability?
• Instant embossing machines have been serviced 3 times in the last 4 years
Q7: How do customers react when they get a check card onsite in the branch?
• Customers are ecstatic and enjoy the convenience of this service
• Customers are completely satisfied because they do not have to wait the normal 7-10 days to receive their check card
Conclusion
The employees of the Jacksonville Beach Office do not use the Instant Card Issuance service to attain more customers. Instead, they use this service to cater to our higher-profiled customers with strong relationships, and for customer emergencies. Employees do not want new customers (those that have already decided to bank with Wachovia) to choose their branch because they can create an instantly embossed card. In my opinion, employees do not promote this service because they do not want to attract customers from other Wachovia centers.
Exhibit III: Pre-Pilot Sales Training Strategy for Wachovia Pilot Branches
1) Sell-in Presentation (high-level, to help the branches “buy-in” to the pilot)
A) Background- Visa is receiving a growing number of inquiries from Issuers about instant issuance of Visa check cards, e.g., Does it improve activation and usage metrics? Do the benefits outweigh the investment in hardware/software? How does instant issuance affect the customer experience? The Pilot will provide Issuers with the objective data needed to evaluate the business case for instant issuance. Three regional banks have designated a limited number of branches for instant issuance (the “test” sites) and an equal number of comparable branches for a control group.
B) Timing- We plan to start the pilot on May 1 and track instantly issued cards for 6-9 months. We would like to have the opportunity to perform some very limited training in the four branches participating in the pilot, sometime in mid-late April.
C) Performance tracking- Quantitative metrics will be tracked and analyzed for both the test and control branches including:
1) Penetration
2) Activation
3) Usage
4) Time to first offline POS transaction
5) Offline/online POS transaction mix
D) Some qualitative research in the branches will be performed: e.g. a brief customer survey about the overall instant issuance experience
E) Remind them about the incentive plan for Visa check cards
2) Script for Employees in Test Branches
A) We will provide a “script” that describes the entire process, beginning-to-end, from the FSR perspective (e.g. making a card, funding the account, sign back of card, complete survey, hand customer take one and card register)
1) FSR makes instant issue card and makes account opening deposit at teller line
• Test branches should issue an Instant Embossed Check Card to every DDA except:
(Crown Banking, Crown Classic Banking, Crown Select Banking)
• All cardholders should be strongly encouraged to choose their PIN
2) Review process for issuing an instantly embossed Check Card
B) FSR gets account opening kit, walks customer through summary of services; FSR writes available balance and date in check card register [is the debit card agreement part of the kit?]
C) We will provide some “sales” tips for FSRs to help them talk to customers about instant issuance including:
a) Conversation points for FSRs to encourage sig-based card usage, faster card usage etc.
b) Include some guidelines for funds availability, so they know what to tell customers for “when” the card will work (how do we want to address ATM, online and offline debit functionality?).
c) Reinforce a few basic Visa check card features/benefits (zero liability, etc)
D) FSR hands card to customer; customer signs back of card
E) FSR has customer complete exit survey
F) FSR gives take-one to customer, reminds them to:
1) Enroll in Visa Extras
2) Sign for purchases to accrue points
G) New Account Survey (at both Test and Control branches for a period of appx 2 months)
1) Customer takes exit survey while sitting at FSR desk. It should take about a minute to complete the survey.
2) FSR takes completed survey, puts it in interoffice envelope. Each branch will mail one envelope weekly to Jerry Oates at mail code NC0974.
3) Script for Employees in Control Branches: Goal = provide new customers with “comparable” instruction compared to Test branches
1) “Sales” tips for FSRs to help them talk to customers including:
A) Conversation points for FSRs to encourage sig-based card usage, faster card activation etc. (comparable to what we’re saying in Test branches)
B) Customer will need to activate their card once they receive it in the mail.
C) Sign up for Visa Extras and start signing for all your purchases
D) Reinforce a few basic Visa check card features/benefits (zero liability etc).
2) Describe the entire process, beginning-to-end, from the FSR perspective
A) Account opening- just like today
B) Order a card- just like today
C) FSR asks customer to complete the New Account Exit Survey
1) Customer takes exit question survey while sitting at FSR desk. It should take under a minute to complete the survey.
2) FSR takes completed survey, puts it in interoffice envelope. Each branch will mail one envelope weekly to Jerry Oates at mail code NC0974.
Exhibit IV: Script for Wachovia Employees in Test Branches
1. Does the customer qualify for an instant embossed Check Card? If yes, go to step 2.
Qualifications: A customer who would normally receive a Classic Check Card qualifies for an instant embossed Check Card; for example, Customer A opens a Free Checking account and Customer B opens a Crown Banking account – only Customer A should receive an instant embossed Check Card
2. Issue an instant embossed Check Card and make account opening deposit at teller line
Customers should be encouraged to choose their own PINs
3. Give the customer their new instant embossed Check Card and describe its benefits:
• Check Cards are convenient, easy to use, and rewarding
• With Wachovia’s Zero Liability policy, you are protected from loss for unauthorized purchases if your Check Card is ever lost or stolen
4. Present the Account Opening Kit to the customer and review the following information:
• Summary of Services
• Funds Availability: Write available balance and date in the Check Card Register
• Debit Card Agreement and Disclosure for Personal Accounts
5. Introduce the customer to Visa Extras and hand them the Take One
• Make sure customers understand they must enroll if they want to participate in Visa Extras
• Encourage the customer to sign for purchases
• Remind the customer that PIN based purchases do not earn Visa Extras points
6. Cordially ask the customer to complete the New Account Exit Survey (June 1-July 31)
• Position the survey as a means to effectively serve customers by getting their feedback about “Instant” issuance of Visa Check Cards
• Every Friday, the branch should interoffice completed surveys to Jerry Oates at mail code NC0974
Exhibit V: October 2006 Key Measures by Branch (Commerce)
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Exhibit VI: New Account Survey- Which Method Feels Safer
[pic]
Exhibit VII: New Account Survey- Extent of Feeling Safer When Receiving Card at Bank
[pic]
Exhibit VIII: New Account Survey- Which Method Feels More Convenient
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[1] VCCs were sometimes mailed via the traditional method for test branches at both Wachovia and Commerce for various procedural reasons that included system downtime, workload, lack of adequate CSR training, or upon the request of the cardholder. Data for these cards was analyzed separately.
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