Co-branded debit card programmes are entering what their proponents describe as an inflection point, as financial institutions and brands rethink debit’s role beyond a simple transactional product. Which raises a question worth sitting with: if debit is already the primary payment method for a growing share of consumers, why has loyalty investment lagged so far behind?
That gap was the central theme of a recent PaymentsJournal webinar, where Paul Dunning, Director of Business Development at Galileo, Dan Dougherty, Partner at Marketgate Advisors, and Jonathan Clarkson, Founder of Carlisle Advisory, made the case for co-branded debit as a strategic engagement tool, not a consolation prize for consumers who cannot qualify for credit.
The Durbin Hangover and What Changed
The history matters here. Airlines were early movers in co-branded debit, but many of those programmes folded after the Durbin Amendment in 2010 capped debit interchange fees for larger banks. The economics stopped working, and the products largely disappeared.
What has changed, Dunning argued, is the infrastructure. ‘I’m an individual that had one of those airline debit programmes pre-2010, and my experience at that time was you take time off work, you go into a branch, you fill out a form, you get that card a few days or weeks later,’ he said. The contrast with today is stark: account opening, approval, wallet provisioning and first spend can now happen within minutes or hours, entirely on mobile or web.
The technology shift also matters for reach. SoFi notes that co-branded debit programmes can target roughly 90% of US adults who own debit cards, a population that includes many debt-averse consumers who would not engage with a co-branded credit product at all. That addressable audience is a different proposition from a credit card programme.
Co-branded Debit Card Programmes and the Cannibalism Question
The concern most commonly raised by institutions sitting on the fence is whether a co-branded debit card will simply pull spend away from an existing credit portfolio. Dougherty pushed back on that directly: ‘We’re not seeing that in the data in the launches that have happened. You have significant populations of engaged loyalty members that just want to use debit, and they weren’t going to use credit today, maybe later, but not today.’ He acknowledged it is still early but said cannibalism is not the pattern emerging so far.
The broader co-branded card market context adds useful weight to that argument. According to DataIntelo, airlines and hospitality providers alone generated $6.8 billion in co-branded programme revenue during 2025, capturing 7.8% of total market value through partnerships with major financial institutions. That scale suggests the market for co-branded loyalty products is large enough to absorb new entrants without obvious zero-sum dynamics between debit and credit.
Clarkson framed the opportunity in terms of existing loyalty data. ‘When you look at the most engaged customers in any loyalty programme, irrespective of the vertical, the people who have the cards tend to exhibit all the behaviours that those brands want,’ he said. ‘Not only do they have the cards and spend on those, but they also tend to be the most engaged people in the loyalty programme. They tend to buy premium products. They tend to have more frequency for the brand than less engaged customers.’
Smarter Rewards, Not Bigger Ones
On the product side, the panel’s argument was less about headline reward rates and more about intelligence. ‘The future isn’t bigger rewards; it’s smarter rewards,’ Dunning said, pointing to artificial intelligence as the mechanism that makes personalisation at scale viable. Real-time offers, digital wallet-first experiences and tighter integration between the card, the app and the loyalty platform are the direction of travel, in his view.
Clarkson added that the open-field nature of co-branded debit is part of what makes it commercially interesting for programme owners. ‘It’s exciting because it enables a green field in terms of building a distinct co-brand debit product that is differentiated from your competition,’ he said, citing day-of-travel benefits and loyalty accelerators as examples of the kinds of features being tested in the airline space.
The generational angle runs through all of this. Dunning pointed out that nearly 70% of Gen Z already uses debit regularly and that the preference is not disappearing. ‘The financial services and co-brand industry has millennials at this point figured out,’ he said. ‘What we see now is that this product is attracting those from Gen Z.’ His next question: ‘What does Gen Alpha want next?’
For brands assessing whether a co-branded debit programme makes sense, Clarkson offered a practical starting point: compare the share of customer transactions running on debit versus credit. Given that debit acceptance costs are typically lower than credit, a brand already seeing heavy debit usage has a reasonable basis for building a programme around it.
