Fintech companies are also using the cards to let customers access their money more quickly, making it so workers can tap their wages ahead of payday and small-business owners can immediately spend the funds they made from their sales.
It’s easier than ever for companies outside the traditional banking sector to issue cards to their customers, which has fueled a spate of creative offerings featuring perks like spending rewards that have largely eluded the category for more than a decade.
Companies offering earned-wage access through debit cards say that they’re giving workers more financial flexibility, such that they will be less reliant on costly options like payday loans to handle bills and other expenses. Debit cards also became a bigger part of the overall card market, as the number of U.S. debit cards in circulation increased 1.7% while the number of credit cards dropped 4.8%, per Euromonitor data.
While The Langston, a fried-chicken sandwich, is the company’s best seller, Satchell likes the ability to “react immediately” and purchase ingredients quickly when he notices that products like the sausage-based Frederick sandwich start showing surprise surges in sales. Debit interchange hasn’t been very lucrative since the Durbin amendment in 2011 capped fees on purchases made through cards issued by banks with over $10 billion in assets. But therein lies a loophole for fintech companies, which can opt to work with smaller banks that aren’t subject to the fixed rates, allowing them to set higher interchange fees that bring in more revenue.
The company says that Durbin-exempt interchange and one-time fees for optional higher rewards tiers help fund the program. “I think you will start to see more and more companies start to reward debit-card consumers, younger consumers, in ways credit-card companies did because it creates this loyalty,” he said.
“A lot of these companies that historically launched credit cards are feeling comfortable launching a debit card because it’s more consumer friendly,” said Alvarez-Evangelista. That way, consumers “are not going into high debt to get access to your goods.”New technology is also helping to fuel the debit explosion thanks to more “turnkey” solutions that ease the process of issuance for those outside the traditional banking space.
“If you had thought years ago about developers building card products, it would have been unheard of,” Marqeta Chief Marketing Officer Vidya Peters told MarketWatch. “Now they’re using APIs [application-programming interfaces] like ingredients to build new card products.”While credit cards are often viewed as more secure than debit cards because they don’t offer fraudsters a direct line to someone’s bank account, there’s been progress in making the debit experience safer.