Jan 4, 2024
Card issuers face many decisions that directly impact their success. One key decision is selecting the right issuer-processor or building the capability in-house (which we will explore in a separate article).
An issuer-processor plays a pivotal role in the card issuing process, handling a range of tasks from transaction authorization to settlement through to enabling specific policies. In this article, we will explore seven key factors that card issuers should consider when choosing an issuer-processor.
The backbone of any issuer-processor is its technology and infrastructure. Card issuers should assess the processor’s capabilities in terms of scalability, reliability, and security. A modern and robust infrastructure ensures that the processor can handle increasing transaction volumes, adapt to new technologies, and safeguard sensitive customer data. When these issuers-processors have challenges or outages, it can be a major cause of customer frustration and loss of business continuity. The infamous incident where Galileo, an issuer-processor for Chime and Varo Bank (amongst others) went offline for a short period was a significant hiccup for the company. Finally, as an issuer, it is key that you find a processor who can keep up with your technology needs and maintains a flexible tech stack for third-party integrations with innovative solution providers.
Compliance with industry standards and regulations is non-negotiable in the financial sector. Card issuers must ensure that the chosen issuer-processor adheres to Payment Card Industry Data Security Standard (PCI DSS) and other relevant compliance requirements eg. PSD2 and PSD3. Robust security measures are imperative to protect cardholder data from potential breaches, safeguarding the reputation and trust of the issuer. Unfortunately, all too often, there are hacking events where cardholders’ details are compromised. In June 2022, the SOCRadar Dark Web Team detected a significant data breach on a hacker forum, revealing the leak of 1.9 million credit card details by BidenCash. Ultimately, a cardholder has to feel comfortable knowing that their issuer will protect their sensitive data.
Every card issuer has unique requirements based on its business model and target market. A good issuer-processor should offer customization options and flexibility to adapt to specific needs. Whether it’s creating tailored loyalty programs or card offerings, implementing unique fee structures, or integrating with other systems, the processor should be able to accommodate the issuer’s individual requirements.
As a card issuer grows, its processing needs will also increase. It’s vital to select an issuer-processor with scalable solutions that can grow alongside the business. It is critical to assess the processor’s track record in handling peak transaction volumes, and inquire about their disaster recovery and business continuity plans to ensure uninterrupted services in case of unforeseen events. Pro tip: It is necessary to ask detailed questions related to the location of their servers and ability to handle significant volume changes.
The cost structure of an issuer-processor can significantly impact the profitability of a card issuance program. Card issuers should have a clear understanding of the pricing model, including setup fees, transaction fees, and any additional charges. Transparent pricing is essential to avoid hidden costs that can erode profit margins. This is particularly important in Europe where card interchange fees have been regulated and continue to be lowered.
Issuers should partner with an issuer-processor that is committed to innovation and has a clear technology roadmap. This ensures that the issuer stays ahead of the curve, leveraging the latest advancements to enhance customer experiences and operational efficiency. Too many issuer/processors are still operating legacy systems – be aware!
Responsive and reliable customer support is paramount in the financial industry. Card issuers should evaluate the issuer-processor’s customer service capabilities, including response times and expertise. Clear service level agreements (SLAs) should be established to define expectations regarding issue resolution, system uptime, and other critical aspects of the partnership.
Selecting the right issuer-processor is a strategic decision that can impact the success of a card issuing program. By carefully evaluating technology, compliance, flexibility, scalability, cost, innovation, and customer support, card issuers can make an informed decision that aligns with their business goals and ensures a seamless and secure payment processing experience for their cardholders.