Modern Card Issuance: The "new normal" in Banking

15 Nov

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What does modern card issuance mean in 2022?

For banks, modern card issuance means delivering an immediate, digital-first payment experience. It also implies the delivery of an intuitive mobile app combined with the swift roll-out of an integrated solution. This involves redefining card issuance to combine traditional payment cards with virtual cards, digital cards (via in-house and OEM wallets) and scalable, resilient payment solutions. Modern card issuance opens the door for more innovative perks and customised credit card programs, including personalised rewards, compelling APRs, more redemption opportunities, adaptable credit lines, and crypto payments.

Origins of modern card issuing

Tech-forward fintechs, neobanks and crypto-exchange platforms have already implemented these digital-first, all-in-one mobile apps.

We foresee that all card issuers will adopt this approach in the short and medium term.

Quite simply, the consumer demand for this new mobile experience is too strong to be ignored by incumbents. Moreover, banks can disrupt the disruptors as they have an edge in the resources and expertise they can dedicate to building new businesses. But there are other reasons why so many card issuers love using this new approach: Modern card issuance brings tangible benefits.

Modern card issuance to unleash new potential

Banks, wallet providers, and card issuer processors want to energise their brands through modern card programs: their customers expect to be in control, via their mobile device, 24/7 of all their payment cards' life cycle steps. They demand services to be instantaneous, simple yet secure. As innovation in payment is set to accelerate drastically with new services beyond mobile payment such as 3-D Secure, Click-to-Pay, pay by instalments, alerts and control, card issuers want a new card issuing platform capable of launching new services quickly and cost-efficiently.They need to invest in a new card issuance architecture that is scalable for the years to come.The good news?This new mobile user experience revolution and the upsurge of digital cards, virtual cards and physical cards bring tangible benefits to card issuers: more card acquisitions, transactions, and fewer frauds for online purchases.This shift also changes how banks engage with their customers, what they sell, and how they demonstrate value. So, let's discover the three dominant principles of modern card issuance.

Three dominant principles of modern card issuance

#1. The modern card issuance approach is not another payment service.To develop and implement a successful digital-first card issuance strategy, banks must understand how the new overall system affects the relationship between virtual, digital and physical elements.#2. Modern issuance does not mean digital-only.Needless to say, in many cases, a digital-only offer will be the most appropriate solution for the issuer. But if banks want to meet the needs of all their clients, with no exception, they must address virtual and physical via an issuance process that harmonises the two aspects.#3. Aiming for a unified issuance offerWith a mobile app acting as a "control tower, "customers want the freedom to orchestrate their own mix of virtual, digital, and physical services. With this client-centric model, the usual proposal with siloed channels (web, online, branch) often unrelated to each other is no longer relevant. Banks need to offer a comprehensive and fully integrated payment card portfolio.

From "physical-first, digital-later" to "digital-first, physical-later."

By 2024, 80% of the world's population will be online. Half a billion people will come online in the next two years. In 2024, they will spend $10.5 Trillion online, an increase of 11% in spending from today. In other words, digital will no longer be a reality for early adopters or even the early majority. Digital will reach the late majority. Beyond that trend, the rise of eCommerce stimulates new payment methods for online purchases. At the same time, the mobile banking app is now the preferred communication channel for cardholders interacting with their banks.There are three main drivers for card issuers to shift to a modern card program:

Cardholders count on real-time service delivery and settings —no more trips to the branch or paper applications form. Everything from ordering a card to getting its PIN code or setting spending limits should be easy to do, immediate, and just a few clicks away.
Cardholders want to be in control, preferably via the mobile banking app or a web interface. In essence, the mobile phone is the new bank branch. It's open 24/7, and there is no waiting in line.
Cardholders expect a comprehensive offer from their banks, including all physical, digital and virtual cards, to meet all their payment needs at stores and online. As innovation accelerates, the mobile app becomes a services marketplace with easy new services discovery and frictionless onboarding.

With a modern card program, card issuers can leverage new benefits in four essential domains and increase their business:

Enhancing UX by providing 24/7 services via the mobile app will stimulate card acquisitions, trigger the top-of-wallet effect and lead to more transactions.
End-user engagement will surge with new products such as virtual cards, push-to-wallet, push-to-merchant, and additional innovative services.
Marketing and branding will be strengthened by new physical card ordering and tracking services and through brand consistency across the entire products and services.
Operating costs will be reduced thanks to the cloud platform's scalability and elasticity, and the digital delivery channel will slash costs and help reduce charges associated with traditional customer touchpoints. Faster release cycles will shorten the time to market for new features and functionalities.

For example, the instant issuance of a virtual card, immediately available at account opening and ready to be tokenised and pushed into digital wallets and merchants, stimulates EMV tokens' usage.

This results in a measured +15% of overall transaction volumes and +10% in card acquisition (for existing customers in North America.)

Why a modern payment card program is a win-win-win

A modern card program is a win-win-win initiative:

A win for cardholders who are in control and get the perfect card for each payment situation they face.
A win for card issuers who increase card acquisition and transactions and reduce online payment frauds thanks to EMV tokenisation.
A win for merchants who improve the payment journey for online shoppers and the overall conversion rate.

To launch such a modern card program, card issuers must re-invent their card issuing platform.In essence, they need to integrate their existing core banking systems (accounts management, transactions management, fraud, authorisation, claims and settlements management) with a real-time, secure modern front-end that can scale up with the latest innovations introduced by payment schemes.That's exactly what the Thales D1 platform is about. We invite you to discover our offer and experience the journey.