Decoupled Debit Card

What Is A Decoupled Debit Card?

A decoupled debit card is not issued by or connected to any specific retail financial institution in the United States, such as a bank or credit union. It is based in the United States on the ability to make an electronic payment from any bank or credit union using the US ACH Network payment system without using a card issued by the bank or credit union.

Deeper Definition

A bank traditionally provided a debit card and connected it to the customer’s checking or savings account. When a consumer pays using a debit card, the merchant sends a request to the bank, which verifies the customer’s balance and debits the amounts for the transaction from the account. A third party, such as a merchant, can generate a decoupled debit card that will make a payment from the customer’s checking account via this approach. They could do so as part of a loyalty program or to save money on debit card processing.

Any checking or savings account can be connected to a decoupled debit card. When cardholders make a purchase, the card issuer pays the retailer and then uses an automated clearing house (ACH) transaction to bill the cardholder’s bank account. A decoupled debit card, unlike a standard debit card, is not tied to a single financial institution. When paying using a decoupled debit card, the transaction is routed to a processing network like MasterCard or Visa rather than through the retailer.

The merchant gets the money once the decoupled debit card authorizes the transaction and utilizes an ACH for the transaction.

Accepting payments via decoupled debit cards has advantages for merchants in terms of decreased processing and transaction costs, as well as co-branding and loyalty-building potential. However, the great majority of consumers have little motivation to pick decoupled debit cards over those given by their banks since decoupled debit cards do not offer considerably different incentives than traditional debit cards.

Decoupled Debit Card Example

One of the first financial firms to provide a decoupled debit card was Capital One, and their version was a MasterCard co-branded with a Richmond, Virginia convenience shop. The decoupled debit card allowed customers to make transactions debited to their bank accounts via ACH, but the inaugural program was discontinued after a year.