Spending across virtually all markets and use cases is increasingly migrating to digital means with cards accounting for the lion’s share of such payments. According to a recent study by McKinsey (Here), card-based payments are expected to drive ~53% of the payments in the GCC by 2026. Broadly, cards can be classified into the following categories:
- Prepaid Cards: The lightest and simplest form of cards. Funds need to be loaded on the cards in advance, and cards can then be used anywhere the card network is accepted.
- Debit cards: These would most likely be linked to an existing bank account with an adjoining overdraft facility.
- Credit Cards: These are used as credit instruments, and a credit check is required before these can be issued. These debt instruments generally have an interest component and other late payment fees attached to them.
The card ecosystem consists of a ‘four-party model.’ It’s the industry’s accepted framework for processing card payments between buyers and sellers. These four parties are:
- Cardholder: The buyer who generally owns the funds and uses the card
- Issuing bank: The bank which is the issuer of the card to the cardholder
- Acquiring bank: The bank which owns the relationship with the merchant (the seller)
- Merchants: The party who is selling the item to the buyer
SimpliFi is an enabler that empowers any business to issue its own branded cards. The business can custom build its card product with its own set of features which can be used to offer differentiated propositions to its customers or to solve payment-related pain points in its ecosystem (e.g. suppliers payments, payouts to its employees or partners, etc). For a business to issue its own branded, customized cards, there are multiple aspects that need to be taken care of:
- Issuer Bank: Issuer banks would be responsible for providing custody accounts, settling payments with the card schemes and fulfilling regulatory compliance requirements
- Processors: These are technology platforms that provide tools for businesses to issue and manage their card programs
- Schemes: These are card networks (e.g. Visa, Mastercard, Mada, etc.) that provide a BIN (essentially a numbering series) on which the cards are issued. The scheme’s logo appears on the card which identifies the network that it belongs to
- Card manufacturers: These are certified players who would be able to print physical cards based on the design provided by businesses and approved by issuing banks and schemes
- Card tokenization: There are wallet providers (e.g. ApplePay, GooglePay etc) which enable virtual cards to be provisioned through the phone so that transactions can be made on POS terminals in a contactless manner to pay by card as well as online payments.
- Data enrichment: Relatively newer to the cards business, these companies help enrich transaction data by cleaning up and enhancing data coming through the works and adding additional valuable information i.e., merchant logo, merchant location, spend categorization etc.
- KYC service providers: Depending upon the nature of the card program, KYC (verifying cardholder identity) may be needed during card issuance or delivery of the cards which is enabled by such providers.
- Courier companies: Ensure delivery of cards to the relevant card holders and, in some cases perform verification at the time of delivery.
- Customer Service: We all would have called our banks for some aspects related to our cards. When businesses issue their own branded cards, they need to also ensure that they provide the necessary customer care channels for cardholders.
In summary, card issuance has multiple technology, compliance, and operations components, and a lot of effort goes into bringing these components together and ensuring these run seamlessly. Therefore, setting up and running a card program requires substantial time and capital investment which is where modern card issuance platforms like SimpliFi can help realize massive savings in time and money for businesses looking to launch their bespoke card programs.
While launching a card program comes with obvious benefits of driving new revenue streams, streamlining business operations, getting deep insights into cardholder spend behavior, and building loyalty with the target segment (e.g., customers, partners, merchants etc.) it is pertinent to understand the economics associated with running bespoke card programs.
- Technology costs: Building and running a technology stack (e.g., operations portal, app, etc.), hosting and addressing local regulations and certifications like PCI DSS.
- Processor costs: Processing costs associated with issuing and maintaining cards, transaction processing, and tokenization.
- Compliance costs: KYB/KYC costs to onboard businesses and cardholders and for ongoing screening to fulfill compliance requirements and manage risks.
- Interchange and scheme fee: Transaction costs and revenue share taken by issuing banks and schemes for each transaction.
- Cost of capital: Where funds are required to be loaded on the cards in advance (e.g. prepaid cards) there are implicit costs around funds being locked onto the cards. Technologies like Just-in-time funding which are made available on the SimpliFi platform, have solved this problem by ensuring that cards are loaded in real-time during the time of transactions, thereby ensuring that funds are not blocked on the cards.
- Fraud Monitoring: Margins on payment products are thin, which means that fraud can very quickly eat into those margins if not kept in check, thereby necessitating cutting-edge fraud management tools.
- Card production & delivery: If physical cards are required the cost of production and delivery of cards can add up quickly, especially if a certain percentage of cardholders are not active or generating sufficient transaction activity.
- Customer care: Providing customer care, especially 24×7 bi-lingual costs can be expensive especially in the initial stages when the card program is scaling up.
SimpliFi has invested a great deal of time and effort in building a modern card issuance platform along with operations and compliance capabilities with all the partnerships in place for you to launch your card program with ease. We provide:
- A modern tech platform for you to integrate with once and to expand to additional markets with no additional tech effort,
- End-to-end card program management capabilities for you to launch your card program efficiently,
- The highest levels of security and complete local compliance, including local hosting, PCI-DSS and other certifications,
- All ecosystem partnerships, scheme and regulatory approvals and card payments know-how to help you launch and scale your program,
- Value-based, simple and fair pricing to allow you to launch and scale your program with limited investment
Want to find out more? Get in touch with our team today!