Traditional card issuers will stay relevant if they rethink their business models

Convenient, fast and reliable

First of all, how popular are card-based payments nowadays? As research shows, this payment method will play a major role in the near future. By 2022, it is estimated that 47 percent of global e-commerce payments will be made using eWallets, while 28 percent will be made using credit and debit cards. At the point of sale (POS), it is expected that 52 percent of all global POS payments are made using either a credit or debit card, with eWallets (28 percent) assuming the third place. These numbers have to do with the fact that consumers find card-based payments convenient, fast, familiar, reliable and secure. A little further in the future, we are likely to see the general replacement of tangible plastic cards by alternative means of payment like mobile payment apps and virtual cards. However, the payment itself will remain card-based and will, thus, to a large extent rely on the established infrastructure of schemes like Visa, MasterCard and local schemes.

Crowded landscape

This is the reason that the card issuing landscape is getting increasingly crowded as new players spot opportunities to tap into the unresolved growth potential of the card payments industry. Over the years many traditional banks have delivered card payments services on a ‘license to operate’ basis, meaning that they have typically issued basis products like debit, credit and prepaid cards and have not shown any interest in differentiating themselves through these products. Challenger and neobanks seem to be releasing the full potential of cards and card payment services by making them the focal point of additional services. This places the cardholder at the center of the payment experience. Think about services and features like real-time information on transactions, convenient onboarding processes and product control (for example spending limits and geo-blocking).

Challenges

As a result, traditional card issuers are feeling the pressure of increased competition. It urges them to transform their card processing platforms to remain competitive, but there are a number of internal and external challenges that need to be overcome. Think of diversifying channels and the demand for a consistent experience or the creation of new technologies that are disrupting financial services and the arrival of new regulations like PSD2, GDPR and PAD. Other than that, players are forced to focus on efficiently processing massive volumes to make the business case viable. In the meantime, internal challenges play a key role as well. Traditional players are, for example, struggling with their legacy systems and their ability to leverage the vast amount of data points produced by transactions. Besides that, players need to protect sensitive data and actual monetary transactions against fraud. And there is also the struggle of managing the increasing number of compliance procedures.

Different options

Driven by these internal and external challenges, traditional players are in search of a future-proof solution. Aiming at transforming their card issuance and processing platforms to fit the payments market of the future, these players are presented with a number of different options (these options are discussed in detail in our white paper).

• Upgrading existing system: The main benefits of this approach are definitely the high degree of familiarity associated with working with the same vendor and the fact that the issuer does not need to make any upfront investment in the area of new software and solutions.
• Building in-house: One primary advantage of building an in-house solution is that it enables the card issuer to remain in full control of every aspect of the development and ensure that the new system can be integrated with other adjacent in-house solutions.
• Buying off-the-shelf: The benefits of buying a solution from a specialist third-party provider are significant. It will provide the card issuer with a set of standardized, ready-to-use solutions and effectively reduce the time-to-market for new products and services. Partnering to invent: Card issuers choose this approach if they feel that there is no appropriate solution available in the market. Partnering with a supplier can provide them with an agile and innovative best-ofbreed system that includes scalable benefits.
• Outsourcing to third party: Choosing to outsource as an approach will help card issuers to develop a more service-oriented issuing infrastructure. It enables them to add new channels and services, phase out old core systems while supporting their overall strategies. It is important to mention that the best outsourcing models offered by third-party providers are based on a stepped adoption approach. This is the case with WL 1-Click Card Issuing Processing, for example.

By choosing the right option, traditional card issuers can keep up with new competitors which makes them relevant in a rapidly changing payment landscape.