CardsFTW #125: Loyalty Debit Cards

Totavi, We Do More Than Product

Thank you for reading this brief interruption in our regularly scheduled programming. We are pleased to share an announcement today of Totavi’s expansion into services beyond core product consulting. In response to demand from our customers, we have added a marketing services practice led by Esther Jang. With an extensive fintech background, from industry leaders like Venmo where Esther started the marketing function, to experience in wealth tech, crypto, and hedge funds, Esther brings a broad array of skills to the Totavi team. I first met Esther when she joined my team at Apto as VP, Marketing, and I am honored to have the opportunity to collaborate with her again.

Esther joined earlier this year and has already made significant contributions to several clients by leading product marketing, investor deck narrative workshops, brand strategy, SEO and content, and more. Reply to this email if you’d like to discuss how we can help solve your marketing challenges.

Money20/20 is Coming

Who can believe my favorite fintech event of the year is later this month?! The entire Totavi team will be attending and we look forward to meeting you. Let us know you want to meet by filling out this quick form.

Like last year, we are coordinating a directory of events that take place around the conference. You can view it here and add your own event on this form.

See you in Vegas!

Hilton Launches a Loyalty Debit Card

Hilton announced what it claims is the world’s first hotel loyalty debit card to UK customers, the aptly named Hilton Honors Debit Card and Hilton Honors Plus Debit Card. Users of the card receive immediate perks with the base level card earning Silver Status and the Plus card earning Gold Status. These cards operate as decoupled debit cards, which means that they are a pass-through account to an underlying deposit account (known as a current account in the UK). Users put this card in front of their existing account so they don’t need to migrate all of their bills and deposits, but can use a new card. I’ve been talking about decoupled debit a lot lately, which is funny. Prior to the Durbin amendment, when all debit interchange was quite high, there were a number of folks working on projects like this. Following the Federal capping of interchange in the U.S. these cards largely went away as there is a) very little money to be made and b) networks have placed rules preventing basic back-to-back transactions.

Superstore retailer Target offers the largest decoupled debit program in the U.S. The Target Circle debit card is a closed-loop offering (meaning it can only be used at Target stores) and funds each transaction with an ACH transfer from an underlying debit account while providing shoppers discounts and benefits.

Other countries don’t have the same regulatory framework and, in what might surprise U.S. readers, paying for a debit card or bank account is quite common in the UK. The baseline  Hilton Honors Debit Card has an annual fee of £60 with a low 0.5% FX fee. The card includes a 3500 point bonus with £1,000 spent abroad. For regular earnings, cardholders will get 1 Hilton Honors Point for every £1 spent on everyday purchases and up to 3 Points for every £1 spent directly with Hilton abroad.

The Hilton Honors Plus Debit Card has an annual fee of £150 with a 0% FX fee. The welcome bonus jumps to 12,000 Hilton Honors Points when spending £2,500 overseas. They will also earn 1.5 Hilton Honors Points for every £1 spent on everyday purchases and up to 4.5 Points for every £1 spent directly with Hilton abroad.

Many UK debit cards charge high FX fees, so these cards will be a good deal for travelers. Both cards are issued on the Mastercard network.

I doubt we’ll see this type of card in the U.S. anytime soon, but I love the move!

Travel Cards and Mergers

Ever since American Airlines merged with US Airways in 2013, the company has been in a rather odd position of offering credit cards from two banks: Citibank, the decades-long issuer of American Airlines cards, and Barclays, which issued the US Airways cards. It’s been very confusing for consumers and marketing, with some inflight Barclays offers being quite amazing, but most of the offerings are from Citi. 

This sort of dual issuer situation happens with a lot of mergers. When Marriott bought Starwood, they kept both issuers and now have both Chase Marriott cards (the original) and Amex Marriott cards (from Starwood). This leads to complex portfolios to manage and market (and sometimes really good earning opportunities for the savvy cardholder).

Now, CNBC is reporting that American may be negotiating with Citi to take the full line of cards a decade-plus after the merger. 

This deal also has me thinking about the future of Alaska and Hawaiian following their merger. As Alaska swallows Hawaiian’s system, we expect all cards to shift to the BofA Alaska Card, with a complex set of Hawaiian cards from both Barclays and Bank of Hawaii going away. To bring all these stories together, I would note that the Bank of Hawaii does offer a Hawaiian Airlines rewards debit card.

This isn’t a deal blog, but mergers present a rare opportunity to stack. Want a lot of Alaska miles? You can get the Alaska Card, BOH Card, and Barclays card and stack 190,000 miles! You know, it will all be Alaska miles shortly.

CardsFTW

CardsFTW, released weekly on Wednesdays, offers insights and analysis on new credit and debit card industry products for consumers and providers. CardsFTW is authored and published by Matthew Goldman and the team at Totavi, a boutique consulting firm specializing in fintech product management & marketing. We bring real operational experience that varies from the earliest days of a startup to high-growth phases and public company leadership. Visit www.totavi.com to learn more.

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