Card issuing seems to be hot right now. Despite the rise of alternatives to card payments, many Fintech’s appear intent on adding payment cards to their product portfolios. And it is not just the “me too” start-up banks.
For example, some international remittance services are adding payment cards to their offerings. This allows customers to spend the money they receive directly but also means that customers do not withdraw funds immediately upon receipt. This extends the customer relationship adding value to both the customer and the Fintech.
A completely different example is that of online food ordering and delivery companies. In some cases these have become pre-paid card issuers. Instead of their delivery agents purchasing the food with a card from a third party issuer who would charge for loading funds and who would get to hold any pre-paid funds, the food delivery companies themselves can manage the cards. This can reduce their costs. Additionally, they are able to join up their deliver systems with their back-end issuer systems to ensure that card transactions can only be performed at the location and for the amount that matches the delivery agent’s next order, thereby reducing fraud.
Adding card payments to Fintech services can be a great idea but it is not without its challenges.
To become a payment card issuer, a Fintech will, broadly speaking need three things:
- A BIN sponsor: an organisation that is already a member of a card network to sponsor their participation in the network.
- An issuer processor: to provide the back-end processing and card management for card payments.
- A card perso (“personalisation”) bureau: to produce, personalise and send out cards.
Payment card processing is based on an industry standard called EMV. These standards ensure that when you wave a contactless payment card at a payment terminal, everything works providing the customer with the simplest user experience possible. Under the hood, however, EMV is anything but simple. There are hundreds of parameters to be configured and managed within the cards, with the potential to alter the behaviour and security of the payment application residing on the card. It is possible for as single parameter set in error to make a card unusable.
Often fintechs rely on their perso bureau to make decisions about how these parameters are configured. The problem with this is that perso bureaus, for all their card expertise, are not experts in issuer processing and this can lead to cards being issued that do not work because the right questions have not been asked. This situation can be further complicated as fintechs often do not have a direct relationship with the payment networks and so raise technical questions to their BIN sponsor or their issuer processor who may not be in a position to answer EMV perso and acceptance questions.
These issues create risk and inefficiency for all the parties involved and often leads to implementation delays – leaving the fintech paying for a production service, whilst the cards are not generating revenue for them yet. For a new start-up, dependent on cashflow, this risk can be very serious. Engaging the right expertise early, will ensure that errors and delays can be avoided, significantly mitigating such risks.
Consult Hyperion has a long track record of working with EMV technology on the issuance and the acceptance side in detail and working with issuer processors on EMV card authorisation system initiatives. We have used this expertise to support EMV card implementations, and this puts us in a unique position to support new EMV issuers to ensure that their implementations go smoothly.