BankAtlantic plays its card for point-of-sale and payroll.
Suppose you're on a cruise in international waters and you're feeling kind of lucky. Thanks to satellite technology and NCR ATMs from BankAtlantic Bancorp (Ft. Lauderdale, Fla.; $5.8 billion in assets), getting a few hundred bucks in blackjack money is no problem. "We have the ATMs on the three major cruise lines," says Lloyd DeVaux, CIO of BankAtlantic.
Furthermore, the bank provides crew members with "smart" payroll cards ideally suited for use at any port-of-call. Not only the crew members, but also their family members anywhere in the world, can draw funds directly from their employer's corporate account, up to a pre-specified limit. "You don't even need your own account," according to DeVaux. "In the case of a payroll card, it can be a corporate account with your profile on it that says you're allowed to take $150."
That's just one example of how a financial institution the size of BankAtlantic can continue to play in the card technology game.
Indeed, BankAtlantic had a bit of good fortune earlier this year, after it decided to reissue all of its customers' Visa accounts as MasterCard accounts. Shortly thereafter, Visa and MasterCard settled in the antitrust lawsuit brought by leading retailers. Then, Visa changed its bylaws to discourage member banks from leaving the association. "[Visa] went in and changed their bylaws and said that we're not going to pass this settlement onto our members, but if you're a current member, and you leave, you have to pay your portion of the settlement," says DeVaux. "We were already out, so we didn't come under that rule change."
Adds DeVaux, "We're either damn good or damn lucky-I don't know which one it is." It's probably a little of both. Indeed, luck doesn't explain how BankAtlantic has managed to offset the revenue drop from the settlement by focusing on mass-market retail with initiatives such as seven-days-a-week branch hours. "Volume continues to grow, and so we haven't seen much of an impact or drop in revenue," says DeVaux. "A lot of that has to do with the fact that our accounts are up so much."
Nevertheless, things will certainly change at the point-of-sale, especially at the start of the year. "The merchants will then have more control over the types of cards they accept, so they'll be able to deny, for example, a signature-based debit card in favor of a PIN-based debit card," says DeVaux. "Now the merchant will have the ability to say, 'Well, in fact we don't want to take the [signature-based] debit card-we'll take the PIN-based card, or give us a credit card.'"
RESHUFFLING THE DECK
That's likely to have a significant impact on interchange revenues. "We get revenue from the PIN-based card, [but] nothing close to the revenue that we get on the interchange," says DeVaux. Instead of a flat fee plus a percentage of the sale as on signature-based cards, a typical PIN-based transaction generates from five to seven cents, regardless of amount. For BankAtlantic, these electronic funds transfers occur mostly through Star Systems, a Concord EFS (Memphis) company, although the bank also recently became a member of the Pulse EFT Association (Houston).
In considering new opportunities, the natural first step is to develop a point of view regarding the point-of-sale. "We're going to continue to see reloadable gift cards, and we're going to continue to see conversion of checks at the point-of-sale and in branches into images and electronic transactions."
But other innovations might take a while. "A lot of people envision the day where you point your device at the Coke machine, type in a number, and it drops a Coke for you and charges your cell phone," says DeVaux. "That's expensive for a dollar transaction."
So the big question for executives at smaller financial institutions is how to make such intuition on technology trends pay off. "The only question for us is: When is the timing right, and how much of this can we do?" says DeVaux. "It might make sense to do a joint venture with somebody-maybe that somebody is one of the EFT networks, or maybe it's one of the card issuers."