The Essential Guide to Card Issuing

What Is Card Issuing?

Card issuing is the process of providing payment cards, such as prepaid, credit and debit cards. This process is typically performed by financial institutions or other authorized entities, otherwise known as card issuers.

Cards may be issued for a variety of reasons and used to purchase goods and services or even to withdraw funds from an ATM, depending on the card's intended uses and limitations. Card issuers are typically responsible for setting terms and conditions for card use, approving transactions, and assuming financial risk.

Types of Cards Used in Payments and Banking Systems

Various card types have distinct purposes and advantages:

• Debit cards allow users to spend or withdraw cash or make purchases using the funds available in their bank accounts.
• Credit cards are used to borrow money from the issuing bank up to a certain credit limit. They may be used to purchase goods and services and, in some cases, to receive cash advances.
• Prepaid cards are similar to debit cards, but they are not linked to a bank account. Funds must be loaded onto the card before the cardholder can use it. Some prepaid cards are single-use and may only be loaded one time, while others are reloadable.
• Virtual cards are delivered electronically and can be used for online transactions or mobile payments.

Card Issuers and Their Role

Card issuers are financial institutions that provide payment cards and a variety of related services. They are responsible for the following activities:

• Card issuance: Card issuers provide payment cards including credit cards, debit cards and/or prepaid cards. They set the terms and conditions for card usage. In the case of credit cards, card issuers must assess the creditworthiness of cardholders and set credit limits.
• Transaction approvals: When a cardholder initiates a purchase, the card issuer is responsible for determining if the transaction should be approved or denied based on criteria such as available funds and credit limits.
• Billing & account servicing: Card issuers are responsible for servicing cardholder accounts. The services they provide may include generating monthly transaction statements detailing transactions, outstanding balances, interest charges and minimum payments; assisting cardholders with queries and transaction disputes; replacing lost or stolen cards; and handling card renewals. Card issuers may also offer loyalty and rewards programs for cardholders, as well as a variety of other benefits (most common for credit card users).  
• Regulatory compliance: Card issuers must follow financial regulations related to everything from interest rates to cardholder data protection.
• Risk management and fraud prevention: Card issuers assume all the financial risk for issuing payment cards. They are responsible if cardholders default on their payment obligations as well as liable for unauthorized card transactions. Card issuers take many steps to reduce their risk, including assessing cardholders' creditworthiness and monitoring for fraudulent transactions.

Card Networks or Card Schemes

Card networks, also known as card schemes, are payment networks that play a crucial role in payment processing: they connect issuing banks and acquiring banks to facilitate transactions between cardholders and merchants. Card networks specify the rules and policies that govern the use of their networks.

A few of the most common networks include Mastercard, Visa and American Express. You'll see the network's logo on most prepaid, credit or debit cards.

Digital Card Issuers and Their Benefits

Digital card issuers are financial technology companies that offer virtual payment cards. They may also offer other payment options from a single platform. Benefits of working with digital card issuers include:

• Spending flexibility: Digital cards can be used for online purchases, used in-app or added to a mobile wallet for in-store payments.
• Security: Digital transactions are typically more secure than cash, checks and even physical card transactions. Digital issuers typically provide fraud detection and prevention capabilities, and because cards are delivered electronically, they are less susceptible to being lost or stolen.
• Branded cards: Working with a digital issuer to deliver branded payouts such as rebates, incentives and rewards can be a great way to provide a more engaging recipient experience.  
• End-to-end solutions: Digital card issuers offer fast-to-market solutions and can handle many of the processes your business would otherwise have to manage in-house. Unlike some traditional issuers, they may offer more innovative solutions, faster payment options, and the latest technology to create seamless payment experiences for your customers.

Card Issuance Process

The card issuance process involves the cardholder, the issuing institution and the issuing platform. The issuing institution acts as an intermediary between the cardholder and the issuing platform. However, the platform typical handles most of the card issuing process.

Here’s how the card issuance process works step-by-step:

1. Application & verification: The prospective cardholder applies for a card. Card issuers are responsible for verifying the applicant’s information, including their credit history and other details. Applying is typically only necessary for credit cards. Financial institutions usually issue debit cards automatically when customers open an account. Prepaid cards may require applying, such as in the case of a rebate. But in this case, card issuers usually won't ask for financial information.
2. Approval & account creation: If the application is approved (again, typically necessary only for credit cards), the issuing platform creates a cardholder account.
3. Card personalization & distribution: A card is created with the cardholder’s name, account number, and other details. Physical cards are sent by mail, while digital cards are usually sent via email.
4. Card activation: Upon receiving the card, the cardholder typically must call a phone number or use an online platform provided by the card issuer to activate the card. This is an important security measure and helps to prevent fraud.

Card Issuing Platforms and Their Features

Card issuing platforms provide payment solutions for businesses and financial institutions, including the ability to deliver payouts to your customers or workforce at scale.

Card issuing platforms offer features such as branded cards, advanced security measures and transaction data to inform your payment programs.

Besides card issuance, platforms may support other payment types. They may even enable you to make cross-border payments or let customers transfer funds to a foreign-currency account.

Embedded Finance and Card Issuing

Embedded finance is the integration of financial services into other types of products and platforms, making it fast and simple to process payments while minimizing additional steps for the customer.

Like other kinds of financial services, card issuing can be embedded into the user experience. For example, customers could apply for a credit card at checkout without having to visit another website or application portal.

Card issuance is a relatively new but growing area of embedded finance, offering tremendous potential for businesses looking to innovative with more seamless customer experiences.

Supplier Payments and Card Issuing

Card issuing can be used for supplier payments, providing businesses with a secure and efficient way to transact. For instance, instead of sending a check, businesses can supply a virtual card to reduce the risk of fraud while making it fast and easy for suppliers to access funds. Card issuing can help businesses optimize their cash flow and reconcile vendor payments more easily.

Expense Management and Card Issuing

When employees travel for work or incur other expenses, reimbursing their out-of-pocket costs can be a complex process. Card issuing is a great solution for expense management, providing businesses with a secure and efficient way to ensure employee expenses are covered. For example, virtual cards can be used to provide employees with a secure and convenient way to make purchases. Being equipped for card issuing can help businesses streamline expense management, track employee purchases and ultimately reduce costs.

Physical and Virtual Cards

Physical cards are traditional payment cards that can be used for online or in-store purchases. They can even be used for ATM withdrawals.

Virtual cards are digital cards that are delivered electronically. They are faster to receive and can be used the same way as physical cards. However, before virtual cards can be spent in-store, they must be added to a mobile wallet.

Both physical and virtual cards can be used for card issuing, depending on the needs of the business and their customers.

Mobile Wallets and Card Issuing

Mobile wallets are digital wallets that can be used to store payment cards, such as credit and debit cards, for easy spending from a mobile phone.

One benefit of mobile wallets is that they offer customers a way to use their digital cards in person. The cardholder simply adds the digital card to their wallet of choice for spending at physical locations.

Wallets are also great for physical cards, enabling more secure and convenient spending. During card issuance, customers can be provided with instructions on how to add their cards to mobile wallets for in-person or online transactions.

Card Program Management

Card program management is the process of managing the many aspects of a card program, including card issuance, transaction processing, security, customer service and more.

Card issuers offering card program management can help businesses offload the administrative burden of making disbursements via cards. This helps businesses reduce costs, increase revenue and provide a more consistent experience for their customers.

Finally, because they don't have to devote as much time and resources to card issuance, businesses can focus on their core activities while leaving program management to the experts.

Benefits of Card Issuing

Being equipped for card issuing offers a variety of advantages to businesses and their customers.

For one, businesses can more efficiently make disbursements such as refunds, incentives or contractor payouts. Card issuers often provide solutions that are more cost-effective than legacy payment processing, so businesses save money on disbursements while providing a more streamlined experience for their customers. Finally, businesses may benefit from tools and capabilities such as proactive fraud monitoring and transaction data analytics.

Customers and employees enjoy a convenient and secure way to receive money, often with the flexibility to make purchases or withdraw cash. They may be able to choose from virtual or physical cards and access additional options such as mobile wallet usage. A more seamless experience can lead to an increase in customer loyalty, helping businesses grow their revenue.

Conclusion

In summary, card issuing is an essential and complex part of the payments industry, encompassing everything from credit and debit card issuance to making disbursements via prepaid virtual and physical cards.

Card issuing can be used for a variety of purposes, including supplier payments, expense management, incentives and consumer refunds.

Card issuing platforms and digital card issuers provide innovative payment solutions for businesses and financial institutions, providing greater access to secure and convenient payment solutions.

Learn about Onbe's payment solutions, including virtual and physical cards.