The Bankwatch

Tracking the consumer evolution of financial services

CapitalOne attack Banks with standalone debit card

I have to update something that I missed earlier in June.  The event was the CapitalOne debit card, and I realised I had missed a significant nuance while chatting to Jason from Wesabe later in June.  The significance began to sink in.  CapitalOne do not have or even need a checking account as I wrongly wrote here.

CapitalOne becomes a Bank with checking accounts « The Bankwatch

This makes Capital One a bank with a checking account. From my reading of their site, which does have lots of words, they are oferring credit card type protection for debit card purchases.

In fact, what CapitalOne have done is separate the debit card from the chequing account, and offer as a unique service.

First, Capital One announced it will start marketing a debit card product that is not linked to its checking account. This is already being referred to as a “decoupled” debit card in the industry. Here’s the deal: it is MasterCard logo’d, and when a transaction is performed it is routed to Capital One, which takes the fee (thank you very much), converts it to an ACH transaction, and forwards that on to you for payment (rip off your fee very much). Other than that, it’s a debit card just like yours – usable anywhere and free.


A de-coupled debit card.  CapitalOne are basing their business model on the transaction revenue associated with the card.  The key there is that the overall profitability of that chequing account drops radically for the Bank.  They are reduced to funds management and the account fee for revenue.  The part I am not so clear on is the $40-$50 debit card income that CapitalOne pick up.  The interchange fee structure is murky at best, and worthy of a future post.  Meantime we can assume CapitalOne are making money on the card, and someone (Banks) are losing.  Input welcome on that last point in particular.

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Written by Colin Henderson

July 8, 2007 at 00:58

Posted in Payments

2 Responses

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  1. Colin,

    The other aspect of the program that really struck me was the distribution channel…by using retailers they establish the card benefits right away, and they have an significant channel sales team.

    My thought after reading the press release: “why would I ever use my regular debit card again?”

    jason knight

    July 8, 2007 at 12:20

  2. […] means that Banks can offer debit cards as a service, as CapitalOne recently […]

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