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Launching a card programme stateside? Everything you need to know.

Helping you understand the landscape as you consider your next move.

The Thredd team

May 09, 2024

For organisations outside of the U.S. the ability to extend payment capabilities to America presents material opportunities and challenges.

For many financial entities, programme managers and solution providers from the UK, Europe and APAC, the idea of launching a card program or extending issuing and processing capabilities to the U.S. is an attractive prospect. However, inherent in the geographic expansion of any financial product is a great number of technical, regulatory and economic considerations to be navigated.

Going to America

The reasons for wanting to enter the American market are as diverse as the entities that undertake it. For example, a solution provider with an embedded finance capability may want to enter the U.S. market as a natural part of its global expansion. A programme manager may seek better programme economics by adding U.S. issuing capabilities, and a financial entity may be drawn to the resilience of America’s debit card market, the country’s most popular payment method.

The fact is that the U.S. is one of the world’s largest payments markets. And, by large we mean massive with debit and prepaid card transactions exceeding $5 trillion annually. It’s no surprise then that the market’s sheer volume and penetration rates continue to represent a significant revenue opportunity for many foreign entities.

Amazing still is the realisation that after so many years, debit, according to quarterly reports from major payment networks, manages to grow in the mid-to-high single digits.

These factors combined with the market's openness to payment innovation and the availability of spending data and insights to inform business strategies make the U.S. an attractive prospect for a great many businesses.

Considering expertise

The ability to issue and process debit and prepaid in the U.S. of course comes with several challenges which is why it's often best to choose a partner with not only U.S. domain knowledge, but one who also understands how you like to do business.

Ideally, a new issuer would equip themselves with U.S. market experts with a deep understanding of that market’s payment intricacies and with seasoned payment experts from  their home market capable of understanding their ways of working.

Regardless of who one ultimately chooses to partner with, it’s always a good idea for a new market entrant to think carefully about the kinds of partner characteristics that will best influence success.

Offering a more neutral take/option on this idea. Feel free to comment or reject if you were OK with the original.

Addressing compliance

If compliance with the Consumer Financial Protection Bureau (CFPB), Office of Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), and Federal Reserve Bank (FRB) weren’t enough, there’s Dodd-Frank, the Durbin Amendment and a handful of other regulations with which to get acquainted when entering the U.S. market. In addition, the U.S. maintains strict Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations to ensure customer identity verification and prevent money laundering.

The Durbin Amendment is particularly noteworthy for new U.S. market entrants. Prior to the Durbin legislation, some U.S. issuers only enabled networks owned or controlled by a single entity, e.g. Visa or Mastercard. The Durbin Amendment mandates enabling at least two unaffiliated networks on a debit card, promoting competition and in theory, innovation.

This is an important consideration in that integrating and managing multiple networks can add complexity to an issuer's operations which in turn might require additional staff and resources.

Assembling the right value chain and controls

Integration with a BIN sponsor and major U.S. payment and ATM networks are of course crucial steps in entering the U.S. market, but much more than “who connects to what”, these and many other decisions are best approached from the point of view of assembling a well-considered value chain with corresponding requirements.

For example, it’s one thing to be compliant with applicable laws and regulations, but new entrants will also need help navigating the complexities of transaction monitoring and regulatory risk in terms of understanding the kinds of things that their sponsoring bank will expect of them regarding KYC, monitoring transactions for risky activity, and what they’ll need to provide in terms of reporting.

The best partners will help steer the course on these questions and just as importantly, their impact on programme economics.

Programme economics and platform

Having grasped the laws and regulations in a chosen value chain, how it all works and comes together and one's responsibilities within it, there is the matter of understanding the business models and the economics behind it and choosing the platform on which to build, implement, and service the programme.

From an economics perspective, one would ideally have a team with expertise in analysing things like interchange and the ability to advise on the implications of various business decisions.

From a technology perspective, there are strong arguments for a best-in-class approach using a cloud-driven issuing and processing platform with a robust set of APIs to help an entity quickly and nimbly design, build and deliver the programme they want with the freedom necessary to meet their goals.

Ultimately, the challenges and opportunities involved in entering the U.S. market are largely the same for any group of competitors. However, the choice of who one chooses to accompany and guide them on the journey is arguably the most important consideration.


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