June 4, 2007 | written by Bruce Cundiff

CapOne Turns “Acquisition” on its Head (Part I)

Rarely do I see an issue or a product development in the payments arena that requires my ongoing attention and blogging. But darned if I will not be focusing on various thoughts and ruminations over CapOne’s “Decoupled Debit” product (can’t find a link directly to the product page, but I’ll keep looking) throughout the week. Yes…it’s that huge.

This is a MasterCard branded card that is co-branded with merchants. The twist is that all transactions are fed through the ACH from cardholders’ existing bank accounts. Believe me, we had a lot of fun earlier today mapping out how this works and who the players are and where they fit in in the relationship and the transaction itself.

So my initial thought (and the reason for the title of the blog) is that CapOne has created something that completely negates the need for a new (DDA) account opening for the “debit card” issuer to acquire the customer. A good portion of the inertia (thanks Jean) associated with capturing the DDA relationship is now rendered unnecessary. This inertia—the low probability of customers migrating banks for a particular product—has been viewed both positively (existing customers are less likely to leave) and negatively (more difficult and costly to acquire new DDA customers).

This is not to say that there are no longer benefits to having a DDA relationship with the customer. In fact I would think obtaining this is a prime portion of the overall CapOne strategy. However, that lifetime value of the DDA customer is inherently changed by this decoupling product. I need some time to chew on this…