In their bid to discourage cash transaction, banks have devised innovative ways to encourage the customers to use the debit card with extra benefits. This is mainly to reduce the cost of money transaction.
Country’s largest lender State Bank of India (SBI) has taken innovative initiatives on this. Foreign sector banks including Deustsche Bank, Citibank and Standard Chartered Bank are likely to follow.
Some other state-owned lenders including Punjab National Bank (PNB), Central Bank of India and Union Bank of India have also evinced interest in joining the bandwagon. The SBI has recently tied up with a loyalty and reward management company, Loyalty Rewardz. Inked in October 2009, the contract will remain valid for three years. Currently, the tie-up covers the SBI’s debit card users in Mumbai which has 6.7 crore users. However, the bank would extend this facility for its entire customer base.
“We want to encourage our customers to use debit cards beyond withdrawing money from ATMs,” said Amitabh Kumar, general manager (alternative channel) SBI. After tying up with the third party for promoting incentive schemes, there is a remarkable improvement in use of debit card, claimed Kumar.
For every Rs 100 spent by the debit card holder, SBI offers a reward point of 2.5 as a standard reward at any of the point of sale (POS). However, if the POS used by the customers for swiping the card is located in the premises of any of the programme partners, then the reward to be awarded gets increased and it varies from company to company.
In case a customer earns 1000 points by way of using the debit card, then he can get free tickets for watching movie, free apparel and so on. “In fact we have got 20 lakh merchandising items on our platter to serve for the Freedom Rewardz customers,” says Bijaei Jayraj, chief executive officer, Loyalty Rewardz Mgmt.
Currently, Loyalty Rewardz is having 30-35 programme partners, comprising some of the big retail service providers like John Player, Fame Cinema, Provogue in its fold.
As per a rough estimate, it costs nearly Rs 50 per transaction for the banks in case the customer visits their branch to withdraw the money through cheque. Similarly, it costs Rs 20 when a customer goes to an ATM for withdrawing money from his account.
The fact that use of ATM by the customers has become bank neutral for cash withdrawal upto some extent has further put a huge burden on the big banks like SBI as their customers visit other banks’ ATM frequently to withdraw money.