So Your Fintech Startup Wants to Issue a Payment Card?
Updated: Feb 18, 2019
Come to think about it, a payment card is one of the key touch points (if not the touch point) customers use in their daily lifes to interact with their financial products and services.
Payment card is a commodity product— or at least, it has been one up until recently. In my view, the traditional banking way of thinking about a payment card is of “a payment medium linked to a current/credit/prepaid account or other fund storage medium”.
This paradigm is flipped on its head in the fintech world. The thinking is different — a card is no more just an subordinate of an account but rather a substantial part of the product itself. In sync with an underlying account; it enables creation of compelling and unique customer use cases and propositions.
It has also probably never been easier and [relatively] cheaper to issue a payment card for non-regulated businesses in Europe.
It is no wonder then that many of the most interesting fintech startups are employing payment cards as a core element of their customer proposition.
Fintech Startups Leveraging Cards in their Proposition
Revolut is a startup that claims to be “the new fair way to instantly send and spend money globally”. With an underlying multicurrency account and obviously a payment card Revolut is seeing some solid traction- $500 million (£342 million) of customer money has been spent or transferred on its cards in just 10 months.
Curve is an example of another card-centered proposition backed by the likes of Seedcamp and Speedinvest. It claims to be “the next generation payment card — a single card built on the MasterCard network that combines all your cards into one. Upload your existing debit and credit cards into the Curve app, and sync them with the Curve card…Curve has created a single, efficient, user focused touchpoint between a user and their money.” [source:Crunchbase]
Pleo, which has recently won best of the show award at Pioneers Festival in Vienna is an example of a card-centered small business proposition. This Copenhagen-based startup is working on a “a company payment card that works for you” —for better management of employee expenses and related back office processes.
Then there are the challenger banks. A next generation of banks obviously cannot do without offering the traditional plastic card — Berlin-based pan-european Number 26 was one of the first one to roll out their card/account offering; followed by an UK-based challenger Mondo and soon to be followed by others as they roll out their product offerings.
Mondo-issued card (source: www.getmondo.co.uk)
Learnings & Considerations
I have recently worked on conceptualizing a card product with one of the challenger banks — drawing on this experience I came up with couple of high-level considerations I believe are useful to keep in mind before diving into the process of issuing your own card.
Note: The below is aimed at fintech startup people with no payments/card issuing experience rather than experts in the area.
#1 Understand the supply chain
Especially if you do not have background is not from cards/payments, the supply chain of a card programme can become quite intimidating. At the very minimum you will be talking to or contracting the following people:
A/ BIN Sponsors
BIN sponsors are companies (usually subsidiaries of banks or banks themselves) who own and sponsor the card’s BIN range (the first 6 digits of a card number which identify the cards’ issuer).
These companies are typically granted either e-money or full banking licenses which can be passported to any EEA member country. This authorizes them to hold customers’ funds on your behalf. They will also be principal members of the card schemes (VISA/Mastercard) and manage the relationship with them.
In addition, they will also hold a bunch of other certifications which enables them to take care of the regulatory and compliance work on your behalf.
B/ Processors Processors are responsible for managing the card account and manage authorisation, settlement and clearing of transactions. This indeed sounds very boring but consider that everything that can be be done with a card — from simply setting a daily limit or changing a PIN number to that cool feature you are thinking about that has never been done before — must be enabled by the processor’s tech platform. Make sure it is a good one.
C/ Card Manufacturers or Card Bureaus. Your card manufacturer will manufacture the cards for you (d’oh); handle the card personalization in accordance with certifications and possibly also handle delivery/fullfilment of the cards directly to your customers.
D/ Card Scheme VISA or Mastercard — easy :).
#2 Choose your partners wisely
Once you decide to go with a partner changing mid-process will inevitably result in money and time lost and will generally be a major pain for you.
Make sure you have your priorities (time to market, pricing, product capabilities or whatever they happen to be) set and out in the open and select your suppliers and partners accordingly.
Remember that you need to benchmark not only individual partners but also the whole supply chain (some processors will not work or are not integrated with some BIN sponsors and card manufacturers and vice versa).
#3 Understand the costs, their complexity and your business case
Launching a card programme is certainly not cheap — at least not startup cheap. If you are looking to launch a prepaid card programme in Europe expect initial CAPEX of at at least 100k euros.
Furthermore, prepare for complexity of the costs — you will be paying one-off setup fees, you will be paying fixed ongoing fees on a monthly/yearly basis, you will be paying for card manufacturing and you will be paying various volume and transaction based fees to multiple parties.
Make sure you understand these costs and run them against your card programme and product business case. Explore various after-launch scenarios and key drivers on both revenue and costs side of things.
#4 Get Your Timing Expectations Right
Do not expect to launch your card programme in 2 or 3 months. Realistically, expect 6 months of work from the time you have your suppliers selected and in place — if all goes well.
#5 Staff Properly
Ideally, have someone with background in payments processing/card issuing in your team or at least as an advisor onboard from the get-go.
Have an experienced dedicated project manager (with specific experience in card programme management ideally) to take responsibility for successful programme launch.
#6 Understand the difference between product and programme
Hopefully you understand your product inside out. You have your distribution and pricing figured out. You can articulate its value proposition for your customer.
Make sure you have the same level of understanding of the card programme you want to launch and how it ties into your product —both from the business and technology point of view.
Thanks for reading and ping me if you would like to know more. Good luck!
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