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Galileo Financial Technologies LLC announced early Thursday the launch of a co-branded debit rewards card for the hospitality and travel industries.
In addition to enabling debit card holders to earn rewards on their purchases, Galileo will use its card-issuing, processing, Cyberbank Digital, and program-management technologies to reduce time to market for the card to a few months, compared to the typical year’s duration, the company says. Using a single platform means brands no longer have to use “multiple disconnected systems” to bring the card to market, Galileo adds. Airlines and hotels will be among the brands initially targeted by Galileo.
Consumers in the United States spend more than $4 trillion on their debit cards annually, Galileo says. “But [cardholders] aren’t getting rewarded for most of that spend,” Galileo chief executive Derek White says in a statement. “That’s why we built a program that helps brands launch debit rewards quickly to capture this unmet demand.”
Once quite common, debit rewards have largely faded from the landscape the past 15 years. Advocates for card issuers say Regulation II, which caps debit interchange rates, is the culprit. Merchant organizations counter such claims are false. Card issuers use interchange to fund rewards.
Despite the controversy around debit rewards cards, they can be profitable, some payments experts claim. “Rewards debit cards can be profitable if managed correctly and issued through a bank with under $10 billion assets, since those cards earn the highest interchange income,” says David Shipper, strategic advisor at Datos Insights, in an email message. “Still, revenue is only one value to merchant brands, who will see this as an opportunity to deepen relationships with customers and issue a card with their brand on it.”
Earning enough interchange revenue to fund the rewards depends on whether the transaction is processed over the PIN network or through a signature network, a decision over which the merchant has control, Shipper adds.
Other headwinds Galileo is likely to face include getting consumers to switch their primary bank accounts, along with moving direct deposits and bill pay. “That process must be as simple as possible or the consumer will never leave their current primary bank or credit union,” Shipper says. “Still, affinity to the merchant brand and the value of the rewards will be incentive enough for many consumers.”
In related news, Mastercard Inc. launched its Business Builder program, which includes credit and debit cards, for creators and small businesses.
Creators, also known as influencers, are individuals that produce monetized content, such as videos, articles, or art, and distribute it through social-media platforms. Creators monetize their content through sponsorships and brand partnerships, charging for access to the content or selling their own products and services.
In addition to the credit and debit card program, Mastercard is making a variety of tools available to creators and small businesses to improve their operations. These tools include business-management and payment solutions from Uome Ltd., a business super app that supports online and in-person payments, invoices, and tax-return preparation, among other business functions. Creators and small businesses will also have access to cybersecurity services from Cyvatar.Ai and credit-building insights from Dun & Bradstreet Inc.
