Branded Cards

Is the plane flying half empty? Why airlines need co-branded debit cards

Travel rewards-focused sites like The Points Guy and The Points Analyst have written extensively about how to leverage co-branded credit cards and airline points to maximize any trip’s budget. And, interestingly, both point out that the role of debit cards in travel rewards was much more significant before the 2008 financial crisis.

Has consumer demand for debit declined since 2008?

Not at all.

The passing of the Dodd-Frank Wall Street Reform and Consumer Protection Act just meant that big banks couldn’t earn as much money from the interchange on debit cards as they once did. So, many walked away from the opportunity to partner with airlines on debit programs.

In fact, 56 percent of consumers prefer debit as their primary payment card (39.5 percent preferred credit) according to S&P Global Market Intelligence. Debit is an especially critical payment method for those earning under $75,000/year, and among Gen Z and Millennial consumers.

You’re qualified: Try our debit card

Airline loyalty executives know the co-branded credit card model is table stakes for the industry already, but how are they reaching the majority of passengers who may not qualify for — or want — credit?

Enter the co-branded debit card. Even customers with low or no credit can sign up for a debit card with their favorite airline, earning loyalty points and rewards toward their next getaway. One airline that continues to go beyond the credit-card-only approach is Hawaiian Airlines, who offers the Bankoh Hawaiian Airlines® Visa© Debit Card through the Bank of Hawaii. Customers are generally still guided toward a credit card option first, but for those who don’t qualify, there’s still a path to engage them with the airline’s loyalty program.

Owning the brand experience

As embedded financial products have grown in recent years, so has the control that airlines and travel brands have to configure Co-branded Debit Cards within an owned customer experience. So instead of sending a customer from their favorite airline’s website over to the bank to sign up for services, airlines can fully integrate the experience within their own site, app, or platform, with no other brand to share the real estate. Plus, despite the passing of Dodd-Frank, there’s still an opportunity to earn interchange revenue from debit purchases.

The loyalty and rewards landscape is evolving to demand more personalization and optionality for consumers than ever before. It’s a natural evolution from credit-only, providing a way for airlines to extend their program to include debit via existing channels. Those that need to revitalize an existing card program or want to launch an entirely new ancillary financial product should look for a full service team of experts to support their business.

We recently discussed the latest technology to modernize card programs in this webinar. Of course, our team is always here to talk about the latest ways financial technology can help your brand engage more consumers than the competition.

Written by Alviere